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Tribune Reverb: Centralizing and Swaps Begin

In a swift series of interrelated deals that would make a hillbilly blush, News Corp. sold eight TV stations to a private equity firm charged last week with centralizing the back office of Tribune�s 23 television stations. Those stations had just changed hands and came under the management of an executive from that same PE firm.

Oak Hill Capital Partners paid $1.1 billion in cash for the Fox stations three days after Tribune went private and hired the Oak Hill executive who set up the PE firm�s TV business. Randy Michaels was in charge of Local TV, a limited liability company formed by Oak Hill a year ago to acquire eight stations from The New York Times Co. for $575 million, wire reports indicate. Oak Hill itself has around $7 billion worldwide in investments led by Robert M. Bass.

Michaels was tapped to run the Tribune broadcast and interactive group just as Oak Hill and Local TV announced the formation of a subsidiary to run the Trib stations. Under the subsidiary, the stations and Local TV will each retain distinct boards, management, financial structures, programming, network affiliations and shareholders, according to Tribune. The inevitable cost cutting will hit operations.

�Things like research and development and automation technology are more efficient on a large platform,� Michaels said in the Tribune announcement. �All of the stations get to share the benefits. We are going to find new ways to operate smarter, cheaper and more efficiently.�

The dominoes began to tumble in the days following the Dec. 20 Tribune transaction in which the company was taken private by Chicago entrepreneur Sam Zell in an $8.2 billion deal. The Los Angeles Times reports that Zell may piece out some of Tribune�s substantial real estate holdings, including the Tribune Tower in Chicago, home of the city�s newspaper of record. One property is already on the block -- a old-time Hollywood studio occupied by KTLA, Tribune�s CW affiliate in Los Angeles.

Tribune has TV stations in 21 markets, two of which overlap with the News Corp. stations acquired by Oak Hill. Those stations include KDVR in Denver, KSTU in Salt Lake City, KTVI in St. Louis, WBRC in Birmingham, Ala., WDAF in Kansas City, WGHP in Greensboro, N.C., WITI in Milwaukee, and WJW in Cleveland.

The station sale expected to close in the third quarter of 2008, subject to regulatory approval.