Cablevision expected to announce $650M deal for Newsday

8:53 PM EDT, May 11, 2008

This story was reported by staff writers Mark Harrington, Ellen Yan, James T. Madore and Thomas Maier. It was written by Harrington.

Cablevision Systems Corp. is expected to announce Monday morning an agreement to acquire Newsday from Tribune Co. in a $650-million deal that would create a regional news and advertising giant with a powerful grip on Long Island.

Charles Dolan, Cablevision's founder and chairman, who has long had an interest in Newsday, said in an interview Sunday night that a few details were still being ironed out. He declined to discuss his plans for Newsday, but said he would soon.

"I think they're just finishing things and we should hear something shortly," said Dolan, 81. "They have an infinite reservoir of minor details that they need to address. . . . There's a group and they're working very hard on it, and we're anticipating they'll be through shortly if they're not through already. I hope we'll be talking soon."

Barring any last-minute glitches, Cablevision, a latecomer to the bidding for Newsday, would have beat News Corp. chief Rupert Murdoch, one of the world's most influential media moguls. Murdoch bid $580 million for the newspaper and dropped out on Saturday, saying a deal became "uneconomical."

Daily News owner Mortimer Zuckerman also bid $580 million. Spokespeople for the Daily News declined to comment yesterday.

Reached at his Cove Neck home, Dolan said executives were wrapping up "minor details."

Under anticipated terms of the deal, Cablevision would take possession of all Newsday's print, online and affiliated media operations, including the commuter daily amNewYork and weekly shoppers in the Star Community Publishing family. Tribune would retain Newsday's real estate, including the newspaper's Melville headquarters, printing operations and affiliated properties.

Spokesmen for Cablevision and Tribune declined to comment.

A source close to the cable operator said, "We see this as an excellent fit with Cablevision assets."

The source said Cablevision is interested in Newsday's advertising operations, including classified sales, and envisions using the newspaper to expand the amount of local advertising Cablevision sells on the hundreds of channels on its system.

Cablevision also sees opportunities to expand its Internet operations with Newsday content and branding, including a local news initiative called My Town that is slated to be expanded later this year, the source said.

If finalized, the deal realizes a long-held ambition by Dolan to own Newsday. He and his son James Dolan, Cablevision's chief executive, hand-delivered the $650-million bid to Tribune chief executive Sam Zell less than two weeks ago, a source said.

One person familiar with Cablevision's thinking said the combination of Newsday and Cablevision provides the cable company with a trove of ammunition needed in its battle with Verizon, which is crisscrossing the region with a fiber optic-based television network called FiOS. "The larger goal of just about anything the company does is to retain subscribers and fend off FiOS," the source said.

Dennis Grabhorn, president of the Graphic Communications Conference, Local 406, which represents Newsday print-shop, delivery and editorial workers, said yesterday he had not heard from Cablevision officials. "We'll have to sit down and negotiate with them," he said, noting that the current union contract extends to 2010. Though wary of dealing with owners outside the newspaper industry, Grabhorn said he was open to the new owners. "Maybe the Dolans might surprise me," he said.

Cablevision's ownership of Newsday would likely bring financial relief and perhaps more investment in its operations after years of cutbacks because of Tribune's fiscal problems, said Christopher Marangi, an analyst with Gabelli & Co. The firm, with an 8-percent stake in Cablevision, has advised against the sale as a distraction from Cablevision's long-term cable and television strategy.

Despite cutbacks, Newsday continues to be among the region's most profitable newspapers, earning almost $90 million last year on sales of approximately $500 million. In the courtship for Newsday, two other suitors had far different financial pictures: The New York Post is said to lose $50 million a year, while the Daily News is believed to be marginally profitable.

But Marangi yesterday acknowledged Charles Dolan may be smart to bid on Newsday at a time when prices for newspapers are low because of the economy's downturn.

"It may be a savvy play -- that newspapers aren't dead yet and he may know more than we think," said Marangi. "This [presumptive purchase by Dolan] should take some of the monetary pressure off of Newsday. They are not as leveraged and constrained as Tribune is."