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Jack Kent Cooke Buys the Daily News for $176 Million

December 11, 1985|THOMAS B. ROSENSTIEL | Times Staff Writer

Tribune Co. of Chicago said Tuesday that it will sell its Van Nuys newspaper, the Daily News, to sports team owner Jack Kent Cooke for $176 million cash.

The deal, which is expected to become final in the first three months of 1986, will end the 12-year publishing presence in the Valley of Tribune Co., owner of the Chicago Tribune and the New York Daily News.

It also will mark the return to Los Angeles of Cooke, 73, the former bandleader and clarinet player who built a media empire under the tutelage of press magnate Roy Thomson of Canada and later a sports empire that included the Forum in Inglewood, the basketball Lakers and hockey Kings in Los Angeles and the football Redskins in Washington.

Cooke sold the Forum, Lakers and Kings to real estate magnate Jerry Buss in 1979, after he had divorced and moved to Las Vegas.

Tribune Co. also announced that it is selling nine cable television systems--including those in Lakewood and Palmdale--to Jones Intercable, a company based in Englewood, Colo., for $237.5 million.

Sources familiar with the Daily News sale said Cooke won the bidding with a dramatic last-minute maneuver. The official bids delivered to Tribune Co. last month were closer to $100 million--to the great disappointment of the board of directors. Cooke swept in with a new, drastically higher price, which, sources said, may have been delivered even as the board was considering the final offers Monday.

"What happens in an auction like this is that everybody plays by the rules and then the rules get changed if they don't like what happened," said one source, requesting anonymity.

Cooke declined to comment on the bidding process.

Tribune Co. is forced to sell the Daily News as a condition of its pending acquisition of Los Angeles television station KTLA, Channel 5. Federal regulations prohibit owning a television station and a newspaper in the same market.

The two sales announced Tuesday will net Tribune Co. about $413 million, going a long way toward easing the burden of the $510 million it will pay for KTLA.

"I think that the paper has a shiny future," Cooke said, explaining the purchase in an interview from his farm in Middleburg, Va., where he now resides. Also, "I wanted to return to my first love, newspapers," he added.

Considered High Price

Earlier this year Cooke bid for but failed to acquire the Evening News Assn. in Detroit, publisher of the Detroit News. He was outbid by Gannett Co.

Newspaper analysts and executives were surprised at the price Cooke agreed to pay, which is high by most measurements of newspaper value.

Cooke is paying an amount equal to about $1,100 per subscriber and 14 times last year's operating profit, said John Morton, an analyst with the Wall Street brokerage firm of Lynch, Jones & Ryan.

"Cooke has paid at the high end of the range," Morton said, "particularly in light of the fact that the paper has fairly intense competition from the metropolitan and also suburban papers around it."

Said Gregory Kieselmann, an analyst with the Los Angeles brokerage firm of Morgan, Olmstead, Kennedy & Gardner: "I thought somewhere around $100 million was reasonable. It looks like he really wanted to get it badly."

One newspaper executive who bid for the Daily News also expected a lower price. "The operation needs a great deal of investment in the printing facilities and the buildings," said the executive, requesting anonymity. "Whatever you pay for the paper, I think it might ultimately cost you $50 million more."

Low Profit Ratio

Morton said the Daily News, which has a circulation of 150,403, made an operating profit of about $12.5 million last year on revenues of about $95 million.

That operating profit margin, roughly 13% of revenues, is low by newspaper industry standards. The newspaper industry overall in 1984 averaged 18%, according to the market research firm of Veronis Suhler & Associates, and small- and medium-sized newspaper usually do better than that.

Cooke apparently outbid at least three others for the Daily News. Those were Chronicle Publishing, a family-owned company that publishes the San Francisco Chronicle; A. H. Belo, a publicly owned company that publishes the Dallas Morning News, and a group of Daily News executives who tried to raise bank financing to buy the paper.

"The Daily News will be in good hands, and we thank the current management and employees of the Daily News for making the paper the success it is today," said Tribune Chairman Stanton Cook, who flew to Los Angeles Monday night to tell Daily News Publisher Byron C. Campbell that Cooke was the buyer.

Cooke said he intends to keep the Daily News' current management "absolutely lock, stock and barrel," including Campbell.

Staff Is Surprised

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