Cablevision, Tribune Co seal deal for Newsday

NEW YORK (Reuters) - Cablevision Systems Corp sealed a $650 million deal to buy 97 percent of Newsday Media Group from Tribune Co, the companies said on Monday, after Rupert Murdoch's News Corp withdrew its bid.

Cablevision said the deal returns the daily Newsday newspaper to Long Island, New York, ownership after 40 years, and saw opportunities for cross-marketing and advertising with its cable operations based in the same area.

But shareholders of Cablevision, run by the Dolan family, have questioned the wisdom of investing in the declining U.S. newspaper industry, saying they preferred the company use its cash to issue a rich dividend or buy back shares.

Cablevision shares fell 1.8 percent to $24.51 in premarket trading.

The agreement was expected after News Corp said on Saturday it withdrew its $580 million bid for Newsday because it could not justify outbidding Cablevision from an economic perspective. New York Daily News owner Mortimer Zuckerman had also bid $580 million for paper.

Tribune and Cablevision said they would set up a joint venture that would be majority-owned by Cablevision, with Tribune holding only 3 percent. Bank of America provided a firm commitment to provide $650 million of senior debt financing, they said.

The completion of this transaction is subject to regulatory approval.

The deal values Newsday at $632 million, with Tribune Co also receiving $18 million at closing as prepaid rent under certain leases of property used in the business.

That would be about seven times the paper's cash flow of $90 million in 2007, a figure mentioned by several sources familiar with Tribune's operations to Reuters in recent weeks.