MELVILLE, N.Y. (MCT) News Corp. chief Rupert Murdoch has dropped his $580 million bid to purchase Newsday, his spokeswoman said Saturday.
Murdoch's withdrawal leaves two other bids for Tribune Co. to consider: Cablevision Systems Corp.'s $650 million offer or a $580 million bid from New York Daily News owner Mortimer Zuckerman. There's the possibility of a higher offer from Zuckerman or a last-minute entry by a new suitor.
"It became uneconomical for us to continue," Teri Everett of Murdoch's News Corp. said.
A source close to talks between News Corp. and Newsday's parent, Tribune Co., confirmed that they had parted ways. Both Murdoch and Zuckerman bid $580 million for Newsday and its subsidiaries, including the commuter paper amNewYork. But Cablevision, based out of Bethpage, N.Y., countered with a bid that was $70 million higher.
Murdoch's exit comes days after he confidently told stock market analysts and journalists that he would prevail over Cablevision "in a couple of days."
He sought to buy Newsday to combine its printing, distribution and other back-office operations with that of his New York Post. The combination would make the Post profitable.
Tribune chief executive Sam Zell reached a handshake agreement with Murdoch last month for Newsday, sources have said. In employee meetings at other Tribune properties, Zell has praised Murdoch and said he wants to build a relationship with News Corp.
However, sources familiar with the negotiations said Zell was concerned about federal regulators holding up the sale of Newsday because Murdoch already owns two newspapers and two television stations in the New York City metropolitan area.
Spokesmen for Zuckerman, Tribune and Cablevision declined to comment.
Tribune has been looking at bids for Newsday, because the clock is ticking on about $1 billion owed this year from its $12 billion debt, most of it from Zell taking Tribune private in December. Out of all the bidders, Murdoch would have faced the most federal challenges, including antitrust and his ownership of two television stations and two newspapers in the New York market.
"I really think that Tribune is very focused on making sure that they work with someone who can get the deal closed," said Mike Simonton, a bond analyst from Chicago-based Fitch Ratings. "The regulatory and legislative uncertainty around cross-ownership could have been playing a role in Tribune's thinking in terms of who to work with."
It's not clear why Murdoch pulled out Saturday, because he's known for more than a week of Cablevision's higher offer to Tribune officials.
Simonton said the way Murdoch last year bought Dow Jones, which owns The Wall Street Journal, may be a glimpse of why he's backing out of buying Newsday.
"He set a price, he said he thought that was fair and let the folks work it out, and threatened to pull it if they didn't want to do it for his fair price," the bond analyst said. "He could have been asked to increase his bid to offset some of the risks that they felt they were facing in terms of the regulatory front. In order to endure those risks, they needed to be compensated more. News Corp. could have said pass on that."
If Murdoch is out of the running for Newsday, Tribune officials may still partner with the media mogul on cost-cutting ventures, including printing both papers in one place, experts said. Newsday already distributes some of Murdoch's New York Post on Long Island.
"I think they view him as someone they could work with on other types of transactions," Simonton said. "I think that News Corp. understands the situation that Tribune is in and Tribune is in a position right now where they can't leave any money on the table."