NEW YORK—Tribune Co. agreed Sunday to sell the Long Island newspaper Newsday to Cablevision Systems Corp. for $650 million.

The deal—structured as a tax-free joint venture—would give Tribune $612 million in cash to pay down its nearly $13-billion debt. Two-thirds of that was incurred in December’s $8.2-billion buyout of the company, which was orchestrated by Chicago real-estate baron Sam Zell. Tribune owns the Los Angeles Times, the Chicago Tribune and other media properties around the country.

“This agreement enables us to maximize the value of Newsday and still retain an interest in this valuable asset,” Zell said in a statement. “The newspaper has a unique circulation base and a tremendously strong brand. I expect them to grow and flourish as a result of this new partnership.”

The agreement was finalized in negotiations that lasted through Sunday.

The bidding for Long Island’s biggest daily paper was spirited, considering that the newspaper industry has been battered by a severe advertising recession and fierce competition, especially for classified ads, from the Internet.

Rupert Murdoch’s News Corp., which owns the New York Post, and Mortimer Zuckerman, owner of the New York Daily News, each offered $580 million. Winning Newsday—whose daily circulation is 387,000—could have helped either man save millions of dollars by spreading printing, distribution and back-office costs across the two papers.

After Cablevision came over the top with its bid, the tabloid rivals decided to back away. Murdoch announced his withdrawal Saturday, saying the deal had become “uneconomic.” With Murdoch out of the running, Zuckerman might have felt that pursuing Newsday was no longer a strategic imperative.

For Cablevision, also based in Long Island, owning Newsday could help it dominate advertising in well-to-do New York City suburbs, allowing advertisers to reach their audience in print, TV and online. Newsday’s large reporting staff could also add editorial muscle to Cablevision’s News12 local-news channel.

Analysts, though, were skeptical that Cablevision could profitably exploit the synergies between TV and print, something that Tribune had been trying to do for years without much success.

Under the terms of the deal, as described by two people familiar with it, Tribune’s contribution to the joint venture would be Newsday Media Group, consisting of Newsday and its Internet operation; AM New York, a free metro daily; Star Publishing, a chain of advertising shoppers; and Island Publications, which produces niche magazines on Long Island. Cablevision would contribute $650 million of newly issued bonds and guarantee a $650-million loan from Bank of America, of which Tribune would receive $612 million in cash. Tribune also would receive $18 million worth of prepaid rent on facilities used to run the joint venture and would retain a $20-million ownership stake in the venture, these people said.

Following the transaction, Cablevision would hold 97 percent of the equity and Tribune 3 percent, the sources said.

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NEW YORK—Tribune Co. agreed Sunday to sell the Long Island newspaper Newsday to Cablevision Systems Corp. for $650 million.

The deal—structured as a tax-free joint venture—would give Tribune $612 million in cash to pay down its nearly $13-billion debt.

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