By Don Jeffrey
Bloomberg News
Tuesday, October 2, 2007

Belo Corp., publisher of the Dallas Morning News, said yesterday that it plans to spin off its troubled newspaper business into a publicly traded company called A.H. Belo Corp. next year. The shares posted a record gain.

Belo plans to keep its 20 television stations, which reach 14 percent of U.S. households, as well as two regional cable news channels, the Dallas company said in a statement. The new company is to include the Morning News, the Providence Journal in Rhode Island and the Press-Enterprise in Southern California.

In the second quarter, the TV group's revenue rose 2.5 percent, while sales from the newspaper division declined 8.5 percent.

"The poor performance of the newspaper business has dragged down the total valuation," said Edward Atorino, an analyst with Benchmark Co. in New York.

Shares in Belo closed at $20.61, up $3.25, or 19 percent, on the New York Stock Exchange.

Robert W. Decherd, chairman and chief executive of Belo, is to assume those same roles at the newspaper business. Dunia Shive, now president and chief operating officer of Belo Corp., is to become president and chief executive of the remaining TV company.

Belo, with 3,800 employees, reported profit of $131 million in 2006 and revenue of $1.6 billion.

"We have discussed with investors and analysts for a long time the frustration we felt that our company wasn't being fully valued," Decherd said in an interview. "We're doing this without disrupting our company in any significant way."

The Dallas newspaper eliminated 111 jobs, or 20 percent of its editorial staff, a year ago, bringing the newsroom total to 450 employees. Decherd said any cost reductions resulting from the spinoff would come from corporate functions rather than newspaper and TV operations.