Tele-Communications Inc., the cable television giant based in Englewood, Colo., announced Monday that it will buy Kearns-Tribune Corp., owner of the Salt Lake Tribune and four other newspapers in Idaho, Nevada and Washington, in a stock deal valued at some $627 million.
TCI, the nation's largest cable company, has contracted with Salt Lake Tribune Publishing Co. L.L.C., owned by the paper's current management and some Kearns-Tribune shareholders, to operate the Tribune under a contract with TCI.In an article in Tuesday's Tribune, Dominic Welch, president of Kearns-Tribune and publisher of the Tribune, said there would be no change in management, staff or editorial policies of the Tribune, nor would it affect the joint operating agreement under which the Tribune and Deseret News share advertising, printing and circulation through their jointly owned entity, Newspaper Agency Corp.
TCI currently operates cable systems in Utah serving about 213,000 subscribers. TCI said the Tribune will have no operational connection with TCI of Utah.
Welch said the deal positions the Tribune to protect its profitability no matter what method is used for home delivery of newspaper-generated news and advertising.
TCI said the acquisition allows it to experiment with distributing news media electronically.
The agreement allows Salt Lake Tribune Publishing Co. first right of refusal to buy the paper if TCI wants to sell it at some future date. Salt Lake Tribune Publishing Co. owners include Welch; A.L. Alford Jr.; Philip G., Thomas K. and Sarah J. McCarthey; James P. Kearns and Robert Steiner.
Kearns-Tribune is a longtime investor in TCI. Kearns-Tribune chairman John W. Gallivan has been a director of TCI for 17 years.
Bloomberg News Service said Tuesday the deal is aimed at solidifying TCI Chairman John C. Malone's control of TCI. A separate agreement between Malone and Kearns-Tribune would allow Malone to increase his voting control of TCI, now 16.9 percent, by swapping his class A shares, which carry a single vote each, for class B shares owned by Kearns-Tribune, which have 10 votes each. Kearns-Tribune also owns 6.6 million shares of Liberty Media, TCI's programming arm.
The deal calls for TCI to issue 52.8 million of its class A common shares for Kearns-Tribune. Bloomberg says those operating assets are valued at $286 million, while the 17.9 million TCI class A and B common shares and the 6.7 million class A and B common shares of Liberty are valued at $341 million.
The deal was announced after the stock market closed Monday. Class A shares of TCI were unchanged at $11.875. Liberty Media shares fell 75 cents to $19.125.
TCI has been a troubled company in recent years. Malone relinquished the title of president last February under pressure from directors concerned about increasing competition from rivals in the home-satellite business.
New president Leo Hindery has spent the past two months trying to reshape TCI's image, motivate what is said to be a demoralized work force and restore its balance sheet. He has also pushed up the introduction of digital television equipment that would allow it to expand its channel lineups.
But the Los Angeles Times said last week that TCI's troubles run so deep that many analysts are skeptical about its chances of digging out. They told the Times they worry about TCI's "entrenched culture and antiquated and poorly clustered systems that make service inefficient and upgrades costly."
Malone's "rate gouging and strong-arm practices" are said to have earned him the nickname "Darth Vader" among government regulators, the Times said.
While Malone denies that TCI is for sale, rumors persist that he is grooming it for a sale since the collapse of its proposed merger with Bell Atlantic in 1994 and his stepping back from day-to-day operations in 1996.
The New York Times Tuesday said analysts had expected a move like this from Malone, saying he had indicated the company hoped to buy back shares in TCI and Liberty that were owned by the estate of Bob Magness, a former TCI chairman.
One analyst said it was probably a good time to buy stock in both TCI and Liberty because each was trading near its 52-week low.
Along with the Tribune, the Kearns-Tribune sale includes the Lewiston (Idaho) Morning Tribune; the Daily News, serving Moscow, Idaho, and Pullman, Wash.; The Whitman County Gazette of Colfax, Wash.; the Daily Sparks (Nevada) Tribune; Tribune Solutions, a Salt Lake City-based newspaper-software-development company; and part ownership of a newsprint mill in Washington.
The merger is subject to regulatory and Kearns-Tribune shareholder approvals. Directors of TCI have already approved it.
Kearns-Tribune is owned by descendants of Utah mining magnate and U.S. Sen. Thomas Kearns, who acquired the Tribune in 1901. They are primarily the McCarthey and the James P. Kearns families. The next largest shareholder is The Tribune employees stock-ownership plan. The remainder of Kearns-Tribune stock is spread among 112 individual stockholders, most of them heirs of Thomas Kearns and the late John F. Fitzpatrick, Tribune publisher from 1922 to 1960.
The Tribune began publishing on April 15, 1871, under the ownership of a group of Mormons who had philosophical differences with Brigham Young.