By Frank Ahrens
Washington Post Staff Writer
Thursday, January 25, 2007

Rupert Murdoch's News Corp. joined the Chandler family's bid to buy the Tribune Co. media empire with hopes of targeting Newsday, the company's Long Island newspaper.

Murdoch's primary interest in a Tribune deal is not to own Newsday outright but to combine that tabloid's business operations with that of the New York Post, which News Corp. owns, according to a source familiar with News Corp.'s plans.

Murdoch's entry into the fray may generate some excitement for an otherwise lackluster auction for Tribune that concluded last week. In addition to the bid from the Chandlers, who already own 20 percent of the company, the Tribune board is considering at least two other offers for its 11 newspapers, 25 broadcast stations and the Chicago Cubs.

One of the other bids comes from Southern California billionaires Eli Broad and Ronald Burkle, whose offer includes a plan to recapitalize the company, take on $11 million in new debt and sell off such non-core assets as the Cubs.

That bid was to have expired yesterday, but Broad and Burkle agreed to a Tribune board request to extend their bid, said a source familiar with their offer who spoke on condition of anonymity because the negotiations are private. The bid now has no expiration date

Initially, neither the Burkle-Broad nor Chandler bids impressed the Tribune board, according to a source familiar with Tribune's thinking who spoke on the condition of anonymity because the board is still considering the offers.

The Chandlers originally proposed to take control of 51 percent of the company, then spin off its broadcast stations and take the newspapers private. Backed by two private-equity investors, the family offered $27 a share, which is lower than the closing stock price yesterday of $30.22.

A combined News Corp.-Chandler deal could boost both media companies. The New York Post is one of the few newspapers gaining readers, but it continues to lose money because of a lack of advertising. A joint operation might trim the Post's losses, the source said.

The Post's circulation increased 5 percent over 2005, to 704,011, according to the most recent newspaper circulation audit in September. Newsday's circulation was down 5 percent, to 411,000.

News Corp., which owns Fox broadcasting in the United States, as well as television and satellite networks and newspapers around the world, has been expanding its empire within New York, where it is based. In September it purchased two newspaper companies that control about 30 publications in the New York City area. The papers claim a combined circulation of about 250,000. Terms of that deal were not disclosed.

The addition of Newsday, which covers Long Island, would give News Corp. a significant suburban footprint and the ability to sell advertising at all price levels -- from the premium rates of Newsday to the lower community-paper rates.

Tribune also owns three papers in Connecticut, including the Hartford Courant. If the Chandler-Murdoch bid prevails, News Corp. could also increase its regional advertising clout, which could help cut costs further.

Partnering with the Chandlers also would allow News Corp. to avoid triggering Federal Communications Commission restrictions on media ownership. Regulations prohibit one company from owning a newspaper and television station in the same market. News Corp. already owns two television stations in New York along with the Post, under a special FCC waiver.

The third known suitor for Tribune is District-based Carlyle Group, which bid only for Tribune's television stations.