One Newsday Suitor Steps Aside, Another Returns

The escalating contest for ownership of Newsday took a couple of new twists on Wednesday.

The owners of The New York Observer dropped out of the bidding, while a former suitor, Cablevision, prepared to get back into the competition, people briefed on the matter said Wednesday.

Cablevision, which signaled weeks ago that it would not pursue Newsday, is putting together a bid of well over $600 million, topping offers from Rupert Murdoch and Mortimer B. Zuckerman, according to people involved in the bidding, who were granted anonymity to discuss confidential information. Cablevision declined to confirm the bid.

The Observer Media Group was prepared to bid more than $500 million, these people said, but then word came last week of competing $580 million offers from Mr. Zuckerman, the real estate developer and publisher, and Mr. Murdoch’s News Corporation. Observer Media tried to interest Cablevision in a joint bid, but instead, Cablevision decided to go it alone.

People briefed on the Observer’s plans said the company’s owner, Jared Kushner, concluded that Newsday was worth more than $580 million, but that he could not get into a bidding war. He informed Newsday’s owner, the Tribune Company, on Wednesday that Observer was backing away. The paper is based in Melville N.Y., on Long Island.

A Cablevision bid would be the latest unexpected twist in a competition that could help determine the financial health of three tabloids that are among the nation’s largest newspapers, and of the Tribune Company, which wants to sell Newsday to help pay its debts.

Since it became public in March, the struggle for Newsday has been largely seen as one between Mr. Zuckerman, owner of The Daily News, and Mr. Murdoch, owner of The New York Post. For each of them, owning Newsday could help them gain the upper hand in their long-standing competition for readers and advertisers, and could save tens of millions of dollars a year from combining operations.

Neither paper releases figures, but The Post loses about $50 million a year, while The Daily News is marginally profitable, analysts say. People briefed on Newsday’s finances say it generated more than $80 million in profit last year on about $500 million in revenue.

For Cablevision, which is already the dominant cable television provider on Long Island, owning Newsday would strengthen its hold on an affluent, suburban market.

But people involved in the bidding say that in addition to having to submit a high bid to win Newsday, Cablevision would have to invest $50 million or more to improve the paper’s printing plant.

The Observer, which does not own its own printing plant, would have had to make a similar investment.

But The Post has more modern presses and The Daily News plans to install new ones next year, so each could print some or all of Newsday.

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