Tribune Publishing plans to purchase the San Diego Union-Tribune newspaper company for $85 million, expanding its reach in Southern California beyond its ownership of the Los Angeles Times.

In acquiring the company, called MLIM, Tribune Publishing also will take ownership of nine community weeklies, including the Burbank Leader and Coastline Pilot, plus the papers' related digital outlets, Tribune Publishing said in a statement.

Los Angeles Times Publisher and CEO Austin Beutner will take on the same role at the new group of San Diego papers and he said in the statement that the San Diego Union-Tribune "will retain editorial independence" from the Times.

Tribune Publishing CEO Jack Griffin has been buying newspaper companies across the country that are within 100 miles of his company's big metro newspapers as part of a strategy to spread costs over a bigger revenue base, thereby boosting profitability despite industrywide print publishing losses. In addition to the Los Angeles Times, Tribune Publishing's group includes the flagship Chicago Tribune, the Baltimore Sun and five other newspaper companies.

As part of the expansion effort, Tribune Publishing acquired Sun-Times suburban newspapers outside Chicago last year, as well as two community papers near Baltimore. Griffin told analysts on a conference call earlier this week that he'll keep up the strategy this year, focusing on cost savings from consolidation and counting any additional revenue as "gravy."

"We're very focused on it and we will continue that posture as far as we can see," Griffin said of the acquisition strategy.

Tribune Publishing will absorb about $100 million in San Diego Union-Tribune pension liabilities, which had been a sticking point in recent months in negotiations between the companies, according to industry analyst Ken Doctor. A spokesman declined to comment on the pension liability amount.

With ownership of the Los Angeles Times and the San Diego Union-Tribune, Tribune Publishing will control the biggest and third-largest newspapers in the Southern California region, Doctor said. The Times has a daily print circulation of 628,910 and 944,795 on Sunday, while the San Diego paper has a daily circulation of 183,456 and 268,038 on Sunday, he said, citing the Alliance for Audited Media.

Adapting to the digital era
Tribune Publishing and other newspaper companies are still struggling to adapt to a digital era in which readers and advertisers have shifted away from print to online and mobile alternatives. Not only are ad dollars in the digital realm lower, but there's also more competition from a swarm of digital rivals.

Mergers allow the newspaper company to reduce expense by streamlining printing, distribution, sales and administration, among other functions, and to cut jobs in the process. Because MLIM is not selling its real estate assets in this deal, Tribune Publishing may face continued rent payments on the San Diego facilities. The spokesman declined to comment on that possibility.

This is Tribune Publishing's fourth acquisition. Last year, it purchased the group of 38 Sun-Times suburban papers for $23.5 million as part of a deal that included renegotiating a print and distribution contract with the Chicago Sun-Times. It paid $29 million for the two Maryland papers.

The acquisition strategy is paying off, says CRT Capital analyst Lance Vitanza. "They're buying these assets at very inexpensive prices and they are improving the quality of the product from the standpoint of national advertisers," he said.

Still, when the company reported first-quarter results this week, net income of $3 million was down from $12 million in the year-ago quarter and revenue had declined 5 percent to $396 million from last year. The company's stock has dropped about 30 percent since it started trading on the New York Stock Exchange last August.

Tribune Publishing also owns the Hartford Courant in Connecticut, the Morning Call in Allentown, Pa., the Daily Press in Newport News, Va., and the Fort Lauderdale Sun Sentinel and Orlando Sentinel in Florida. The company split last year from its former broadcast sibling, which is now called Tribune Media and also is based in Chicago.

Tribune Publishing will pay $73 million in cash and $12 million in its stock as part of the transaction, which is expected to close by the end of June, according to the statement.

Lynne Marek is a reporter at Crain's Chicago Business, where this story first appeared.