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Belo to spin off newspaper unit

October 02, 2007|Martin Zimmerman | Times Staff Writer

Belo Corp. said Monday that it would spin off its newspapers -- including the Press-Enterprise in Riverside -- into a separate company, transforming itself into an owner of TV stations exclusively.

The proposal got a quick thumbs up from Wall Street. Belo shares jumped almost 19%, closing at $20.61, up $3.25.

"I think Robert Decherd's doing the right thing," said analyst Edward Atorino of Benchmark Co., referring to Belo's chairman and chief executive. "The market's already giving him a pat on the back."

Dallas-based Belo has been under pressure from shareholders to separate its TV business from its lagging newspaper publishing division. Its TV group's revenue rose 2.5% in the second quarter while the newspaper group's revenue fell 8.5%.

Newspaper ad sales and circulation have been declining in recent years as readers and advertisers have migrated to online news sources. Websites operated by Belo and other newspaper companies have attracted a growing number of readers but have yet to replace the ad revenue lost by their print publications.

If federal regulators approve, Belo will create a publicly traded company called A.H. Belo Corp. and spin it off to current shareholders of Belo Corp. (A.H. Belo Corp. was the company's name from 1865 to 2001.)

Once the spinoff is completed, Belo will own 20 TV stations reaching 14% of U.S. households. The unit will have 3,200 employees and annual sales of $750 million. Its TV markets will include Dallas-Fort Worth, Houston, Seattle and Phoenix.

Besides the Press-Enterprise, A.H. Belo will own the Dallas Morning News and the Providence Journal in Rhode Island, as well as smaller daily and weekly papers and a collection of online businesses. It will have 3,800 employees and annual revenue of $750 million.

"I'm very optimistic about it," Press-Enterprise Publisher Ronald Redfern said. "I think splitting the businesses will allow the newspapers to focus on what they do best and the TV stations to focus on what they do best."

In a statement, Decherd said the move also would allow investors "greater insight" into the two business divisions.

Belo's $1.2-billion debt will remain with the TV company. That will allow the newspaper company to start with a clean slate. But Fitch Ratings saw it as increasing the risk of owning Belo Corp. debt. Fitch cut Belo's debt rating to junk level, BB-plus.

Belo said it expected to complete the spinoff in the first quarter of 2008, pending regulatory approvals. Although some staff reductions may occur at the corporate level, Decherd said the move wouldn't affect newsroom staffing.


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