Sinclair buys Tribune Media for $3.9 billion

Believe it or not, pension fund liabilities for current and former newspaper employees don't apply to tronc. Tribune Co. eliminated its traditional pension plan in the late '80s in favor of a 401k and an employee stock ownership plan. Anyone who hired on with Trib before then was eligible for a pension. When the company split, pension fund liabilities for newspaper employees remained with Tribune Media instead of tronc as part of the deal. When I decide to take my pension -- it'll be tiny because I joined the company only a year or so before the pension plan went away -- it will come from Tribune Media/Sinclair.

Thus, tronc pays no pensions that I'm aware of -- although it's had to pay for buyouts, severance for layoffs and settlements with executives it's cut loose.

 

My Tribune pension will be surprisingly not horrible ($760/month) considering that I started there only 4 or so years before it ended. Last I read the fund had more than a billion dollars in it, so it remains pretty well funded.

They keep moving it around, though. First it was with Hewitt, then Vanguard, and now TransAmerica. I check it every so often just to make sure I'm still accounted for. Counting on that pension to pay for wife's health insurance during the 10-year gap while I'm not working and she's too young for Medicare.

 

The buried lede here is that Sinclair, which is über-conservative, is making a big national move and having a go at Fox while it's wobbling.

 

A pension fund liability can exist from a plan that closed decades before. The liability does not cease until the last beneficiary dies.

I broke down and went through the footnotes. Tronc assumed 101 million dollars of pension fund liabilities when they bought San Diego. They also owe 60 million in retiree health benefits. Those health benefits are in part for executives retirement plans and there is probably a legacy liability out there somewhere from a union contract. 60 million is a lot for a company the size of Tronc to jsut cover the executives.

I have no idea why Tronc bought San Diego and assumed that pension liability given industry conditions..

 

Fox, however puts out a good product. They are willing to pay to hire good people and for good production values. Sinclair will not do that.

 

Ah, forgot about San Diego. Also might have to pay pensions for the Chicago-area acquisitions from the Sun-Times. As I said earlier, Jack Griffin spent a lot of money the company doesn't have.

Addressing the original topic of this thread: Based on posts elsewhere, Sinclair's purchase is not a good thing for the Tribune Media properties. A friend who has some knowledge of the broadcast industry provided this one-word description of Sinclair: "Cheap."

 

The idea was to buy San Diego and then the OC Register/Riverside P-E, which would have given the company close to a monopoly over Southern California. The company had the winning bid, but the feds raised antitrust concerns and so the OCR/P-E went to the LA News Group (LA Daily News etc) -- and talk about bad timing. It's hard to imagine the current administration raising antitrust concerns about the deal.

 

Was the Los Angeles Times doing an Orange County zone? If the Times had been successful in their bid they could have closed the OCR and mover the subscribers over to the Times. I think the Times still offers home delivery and has an Orange County bureau. The Times could have picked up most of the revenue while eliminating many of the costs of publishing a separate paper.

But the Times did not have home delivery in San Diego County nor did they have a particularly large bureau. No material duplication existed. Tronc paid 85 million for the paper and another 101 million for the pension fund liabilities. That is a huge overpay in today's market.

 

You assume this is a company that had any ability to make a correct decision.

 

I'm not sure these are overpays. The companies are paying what they need to in order to get the properties. Singleton piled on debt building his empire - he knew he'd never pay it back - the point wasn't to pay the debt off, it was to obtain access to the cash flow. You cut expenses, make your payments and pocket what is left over at the end of the month. Once there isn't enough to make the payments, you walk away and leave the keys.

 

Fair enough. But there is the opportunity cost. Papers are selling for less than five times cash flow. I don't think San Diego was cash flowing 37 million a year which is what is needed to justify a 186 million dollar purchase price. Tronc also did not get the real estate in San Diego. One does not pay a premium price for a property you plan to milk dry anyway.

 

The Times used to have an Orange County zone, and for that matter used to have a San Diego zone. The Orange County zone was eliminated before the pursuit of the Register. The Times' Orange County bureau still exists, in skeleton form. Home delivery is still available and The Times has a fair number of subscribers in Orange County, but the paper they get is essentially the same one they would get in L.A.