Headcount Reduction a Factor in Zell’s Asset Sales
The Tribune owner has boosted already attractive properties’ value by cutting weight and creating space at top metropolitan papers.
July 14, 2008
First came the announcement today that Ann Marie Lipinski, the editor of the Chicago Tribune, would step down. Again, today, news broke late that Los Angeles Times publisher David Hiller is out of the organization—and this comes in the same month the vaunted daily announced more than 250 cuts.
Seem familiar? Well, under Sam Zell, the Tribune Co. owner, this has been part of the script as he seeks to reduce billions of dollars in debt—on time—by unloading underutilized real estate, cutting excess payroll and, of course, selling the newspapers themselves. This becomes that much more important of a task at this juncture, considering that the Tribune’s Chicago Cubs had not hit the auction block quickly enough for its seller.
The Los Angeles Times, in particular, has been targeted for budget cuts that grew into disputes and public showdowns between Chicago executives and the heads of the paper. Hiller fired back to back editors, in the form of Dean Baquet, and then, James O’Shea, over their resistance to budget cuts. Hiller, in 2006, succeeded Jeffery Johnson, reportedly another casualty of budget arguments—that, of course, was prior to Zell’s buyout. It should be noted, also, that Baquet was ousted prior to Zell’s taking over of the Tribune.
Commanding a good multiple for a newspaper becomes a little bit easier once entire sections have been replaced—just look at the $650 price of Newsday after Zell dumped entire desks in a cost-cutting effort.
For Zell, who has not only amassed overnight a group of newspapers in coveted media markets, but also successfully re-appropriated real estate for sale when feasible, this goes further to boost his papers’ values.
The source who tipped off MergersUnleashed about Hiller’s pending departure said the one property with which Zell is least likely to part is his flagship Tribune newspaper—its behemoth headquarters are a staple of the Chicago skyline, the paper itself is Zell’s old hometown paper and, most obvious, the company is named after it.
But that doesn’t mean Zell won’t shed other assets—particularly, print.
The biggest of Zell’s daily papers, like the Tribune, have revenues at or near $500 million annually, the source said. Any of the Tribune’s 22 television affiliates are only pulling in—at most—a third of that. And with a chief executive of a television division waiting in the wings—Tribune COO Randy Michaels formerly Zell’s head of Clear Channel—it might not be the best move to start hemorrhaging broadcast assets.
Neither Hiller nor the Tribune responded to comment when contacted today.
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