Canary in the coal mine?

It appears private equity wants nothing to do with Tribune Co.  This does not bode well for Old Media.

Tribune took a wrong turn back in the late dot-com days (anyone remember "AOL-Time Warner"?) when it swallowed up the Times-Mirror newspapers, banking on some ephemeral notion of "synergy" between newspapers and broadcast (and online too).  As part of the deal, L.A.'s Chandler family, proprietors of Times-Mirror, took an ownership stake in Tribune.

It was never a good match, and last summer the Chandlers forced managment's hand.  The whole company was put up for sale.

The bidding is now over, and the most substantial offer is from the Chandlers themselves — who propose keeping the newspapers (including their onetime flagship Los Angeles Times) and spinning off the broadcast division.

It must be mighty disappointing to Dennis FitzSimons and the rest of the suits at Tribune Tower in Chicago that no private equity bidder came forward.  As Dan Denning wrote in this space late last year, "Private equity transactions usually involve a lot of leverage (debt). The organizers of the transactions look for a company that throws off regular cash…cash that be used to service the accumulated debt."  And if there's one thing Old Media still does well, it's throw off cash.  Newspapers still turn 20% profit margins; large-market TV stations, 40%.  So what makes Tribune look like such a dud?

There's still no shortage of private equity deals for Old Media.  Within the past month or so, private equity snapped up the Minneapolis Star-Tribune (for about half the price McClatchy paid a few years ago), and the New York Times just unloaded its chain of medium-market TV stations onto private equity as well. So it remains to be seen if the lack of private equity bidders for Tribune is simply a case of Tribune asking too dear a price…or if this is a canary in the coal mine for Old Media.