Florida Looms Over a Possible McClatchy-Tribune Deal

(Bloomberg) -- Florida’s pivotal role in U.S. presidential elections could become a potential obstacle in a deal to expand a newspaper empire.

As Tribune Publishing Co., owner of Florida’s Sun Sentinel, considers offers for the business, one of the potential combinations under discussion has sparked concerns that it could create a concentration of regional newspapers under McClatchy Co., according to people familiar with the negotiations. As well as competition issues, one of the concerns is that the deal could draw added political scrutiny because McClatchy chairman Kevin McClatchy has been a donor to Democrats, the people said.

Tribune Publishing is working with legal advisers to try to preempt and assuage potential antitrust concerns, the people said, asking not to be identified because the discussions are private. Tribune wants its shareholders protected in the event of a lengthy review by President Donald Trump’s Department of Justice, the people said.

While political considerations generally fall outside the scope of antitrust law, a Justice Department review could impede or delay a deal.

McClatchy is one of three bidders vying for a suite of publications including the Chicago Tribune, New York Daily News and Sun Sentinel and is offering some stock as part of its bid. McClatchy’s portfolio of 30 newspapers already includes the Miami Herald, so a deal would give it the largest newspapers in the state’s two biggest counties -- Miami-Dade and Broward -- as well as fast-growing areas such as Orlando.

McClatchy’s bid, which is fully financed, is higher than those of rivals Donerail Group and Texas-based newspaper company AIM Media, according to people with knowledge of the matter. There is no guarantee of any deal and negotiations could fall apart, the people said.

Representatives for Tribune Publishing, McClatchy and Donerail declined to comment, while AIM didn’t respond to requests for comment.

Tribune Publishing has a market value of $524 million. Its shares rose 1 percent to $14.74 at 3:27 p.m. in New York trading, narrowing losses for the past year to about 17 percent.

Neighboring Newspapers

“If McClatchy and Tribune combine, there is a good possibility that the DOJ will have antitrust concerns about competition between their newspapers in South Florida,” Jennifer Rie, a Bloomberg Intelligence legal analyst, said in an interview. “These concerns could be resolved with the divestiture of one of the papers.”

Tribune Publishing is preparing to argue that the Miami Herald and Sun Sentinel have complementary geographic footprints and there’s no real competition between them for advertisers or subscribers, the people said.

As Tribune and McClatchy battle a shift among advertisers to digital media and the rise of alternative news sources, the plan is to highlight the importance of scale to the regulators, the people said. Newspaper advertising in the U.S. cratered about 80 percent to $10 billion in 2017 from a peak of $49 billion in 2005, according to Magna Global.

The declines have accelerated in recent years and newspaper ads are expected to drop to $4 billion in 2022.

Political Divide

Florida’s long been deeply divided along political lines, and several important elections -- most notably the Bush-Gore presidential race in 2000 and last month’s Florida gubernatorial and U.S. Senate race -- have triggered controversial recounts on the slimmest of margins.

The current discussions have also included Kevin McClatchy’s future role at a combined company, the people said. McClatchy, who took over as chairman in 2012, has donated more than $170,000 to Democrats, including Barack Obama and Joe Biden. He donated $5,000 to the Republicans. He hasn’t made a donation since 2010, according to federal donation records.

Trump has previously suggested antitrust scrutiny against companies that own journalistic properties engaged in tough coverage of his administration. In the process, he has threatened to upend the Justice Department’s traditional independence and fueled speculation that ongoing government action sprung from politics.

Kevin McClatchy is a fifth-generation member of the founding family for the company, whose history goes back to 1857, when James McClatchy helped start its first newspaper in the wake of the California Gold Rush. The company’s shares rose 7.2 percent to $6.85 Monday in New York trading, though they are still down about 34 percent in the past year.

Donerail, run by former Starboard Value executive William Wyatt, and AIM have discussed teaming up for the assets, people with knowledge said. Donerail is planning to sell some of the newspapers to individual buyers, the people said. Neither bidder owns any Florida-focused newspapers.

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