L.A. Times parent to buy San Diego paper, expanding reach in Southern California

The parent company of the Los Angeles Times has agreed to buy the U-T San Diego, uniting the newspapers of California’s two largest cities under common ownership.

Tribune Publishing — owner of The Times, the Chicago Tribune and other daily newspapers — announced Thursday that it will pay $85 million in a cash-and-stock deal for the U-T, eight community weeklies and related websites.

The acquisition will extend the company’s reach into the country’s eighth-largest city and give it a dominant position over a wide swath of Southern California.

“We’re combining two of the most enduring institutions in California,” said Austin Beutner, Times publisher and chief executive. “We can take the best of what each newsroom can offer, and offer it to a broader customer base.”

Beutner will serve as publisher of both papers and as chief executive of the newly formed California News Group, which will oversee Tribune Publishing operations in the two markets.

He said the U-T would remain a separate newspaper, with an “authentic voice” reflecting its community. Beutner pledged to preserve its editorial independence. He added: “I also know the Los Angeles Times will benefit from a closer connection with its older sibling down south.”

Executives at both papers are examining how operations can be consolidated. One possibility is that The Times will print the San Diego paper.
The U-T, whose roots date to 1868 and which was known until recently as the San Diego Union-Tribune, serves a metropolitan area of more than 3 million. It has 622 employees, 173 of them in the newsroom. The paper has won four Pulitzer Prizes, the most recent in 2009.

Jeff Light, president and editor of the U-T, described Tribune Publishing as “a good buyer” with “a tradition of journalistic excellence, along with the resources to move us forward.”

The privately held U-T does not disclose financial information. Light, however, said by email that the company had “one of the industry’s better bottom lines.”

He added: “The business opportunity, and the journalistic opportunity, is very big.... Without a doubt, there will be some savings — which, unfortunately, is another way of saying layoffs.”

In their quest for financial stability, newspaper companies have been buying publications in adjacent markets. The aim is to capture revenue and readers and cut costs by combining printing, distribution and other operations.

The idea is to gain time for publishers to figure out how to extract more revenue from their sizable online audiences. Newspaper circulation and advertising have declined sharply over the last decade, and revenue from newspaper websites has not filled the gap, necessitating layoffs and other cost-cutting.

The print product still generates the lion’s share of revenue at Tribune Publishing and other legacy media companies.

Consolidation could allow the companies to extend the life of newspapers and generate revenue to invest in digital products and other ventures.

Ken Doctor, a media analyst and consultant in Santa Cruz, said of the San Diego acquisition: “It makes sense [but] such consolidations depend on how smartly you do it.”

“Consolidation can be done with a meat cleaver or it can be finely sewn together, and that is what has to be done here as this goes forward,” he said.

Tribune Publishing’s newspapers and their websites were spun off from Tribune Media last year as a separate, publicly traded entity. Since then, the new company has purchased publications in Chicago and Maryland to bolster its flagship papers in those markets.

The U-T purchase will be the fourth acquisition by Tribune Publishing.

Thursday’s announcement was made after financial markets closed. Tribune Publishing will pay $73 million in cash and $12 million in common stock.

As part of the agreement, Tribune Publishing will assume the U-T’s pension obligations. The acquisition does not include the paper’s Mission Valley headquarters, other real estate holdings or its printing presses.

The deal is expected to close within a month.

Addressing several hundred members of the U-T staff Thursday afternoon, Beutner said: “Everybody rest assured, this is not the people from Los Angeles coming down to take over San Diego.”

The room grew silent when an employee asked whether there would be staff reductions. Beutner said there would be, but he declined to give specifics.

After the announcement, John Wilkens, a U-T reporter for 27 years, said, “We’re in a situation where one kind of uncertainty is over, but now another one begins.”

In an earlier interview, Beutner declined to comment on whether the company was looking to make additional purchases. Potential targets include the Los Angeles News Group — which owns the Los Angeles Daily News, the Daily Breeze and other papers — and the Orange County Register.

In recent months, The Times has boosted its coverage of statewide issues, restoring a free-standing California news section in print and online. In a search for new revenue, it has launched email newsletters and plans online ventures, including a digital magazine focusing on race and ethnicity called #EmergingUS, which will debut this summer.

The U-T is descended from the San Diego Union, established in 1868, and the Evening Tribune, founded in 1895. The Copley family bought the papers in 1928 and maintained them as separate publications until merging them in 1992.

The San Diego papers, much like the Los Angeles Times, were long a powerful force in their community. The Copleys used their newspaper pulpit to champion favored politicians, economic development projects and the establishment of UC San Diego in 1960. The editorial pages espoused a conservative, pro-business philosophy.

In 2009, owner David Copley sold the company to Platinum Equity, a Beverly Hills firm, for an undisclosed price. Two years later, San Diego real estate developer Doug Manchester bought the Union-Tribune for more than $110 million. In 2012, the name of the paper was changed to the U-T San Diego.

Manchester proved a controversial publisher. Under his leadership, the U-T published front-page editorials and wraparound sample ballots supporting political candidates, breaching the traditional wall between news reporting and opinion.

John T. Lynch, then CEO and part-owner of the U-T, defended the practice, telling the New York Times in 2012: “We make no apologies. We’re doing what a newspaper ought to do, which is to take positions. We are very consistent — pro-conservative, pro-business, pro-military.”

On Thursday, Manchester said it had been a privilege to own the U-T and to be “a cheerleader for the good in our community.”

The U-T reported Sunday circulation of 271,564 for the first quarter of this year. On other days, circulation has ranged from 169,484 to 222,479.

The Times, the nation’s largest metropolitan newspaper, has been a dominant force in Southern California since 1884, when it was bought by Gen. Harrison Gray Otis, a fiery Civil War veteran.

He and his descendants in the Chandler family ran the paper for more than a century, using their influence with elected officials and the business elite to shape the region’s development — most famously through their support for the 233-mile aqueduct that brought water from the eastern Sierra to the San Fernando Valley, enabling L.A.’s spectacular growth.

In 2000, Tribune Co. of Chicago bought Times Mirror Co., The Times’ parent, for $6.38 billion. Seven years later, Chicago real estate investor Sam Zell bought the company in a highly leveraged deal.
Battered by the Great Recession and a steep decline in advertising revenue, the company filed for Chapter 11 bankruptcy protection in 2008. It emerged from bankruptcy in 2012, with a new management and board. Tribune was then a diversified company with newspapers, television stations, classified advertising websites such as Cars.com and other holdings.

The newspapers were spun off as Tribune Publishing in August. A week later, Beutner, an L.A. civic leader and former investment banker, was named publisher and CEO of The Times, succeeding Eddy W. Hartenstein, who became nonexecutive chairman of the new company.

The Times reported Sunday circulation of 965,598 and average weekday circulation of 650,718 for the six months that ended Sept. 30.

Tribune Publishing on Wednesday reported that first-quarter revenue fell 4.9% to $396 million from a year earlier. Profit was $2.5 million.

andrea.chang@latimes.com

Twitter: @byandreachang