- The Washington Times - Monday, April 2, 2007


Even with the buyout’s $8.2 billion price tag, the outlook for the nation’s second-largest newspaper publisher remained as uncertain as it did six months ago when it began a strategic review to boost a lagging stock price.

A big chunk of new debt will be required to pay the $34 a share cash buyout. Mr. Zell is counting on repaying the debt largely through tax benefits from a new employee stock-option plan that would supplement existing retirement accounts for the company’s 20,000 workers.

Aside from selling the Chicago Cubs baseball team and a stake in Comcast SportsNet, Mr. Zell and Tribune executives were mum about prospects for the rest of the company’s assets, including 23 television stations and nine newspapers ranging in size from the Los Angeles Times, Baltimore Sun and the Chicago Tribune to the Daily Press in Newport News, Va., that will remain after two papers in Connecticut are sold.

Tribune Chief Executive Officer Dennis FitzSimons said there are no plans to cut the company’s work force or sell off other newspapers or TV stations.

But industry observers said more divestitures or spinoffs are likely, especially as Mr. Zell learns the ropes of the newspaper business and a company that has been losing readers and advertisers to the Internet.

The company’s complex deal with Mr. Zell has a relatively small breakup fee — $25 million — leaving open the possibility of another counterbid from Los Angeles billionaires Eli Broad and Ron Burkle, who also submitted a $34-per-share offer for Tribune.

Mr. Zell plans to invest $315 million in the media company and will become chairman of Tribune’s board when the buyout is complete in the fourth quarter. The offer requires shareholder approval.

The buyout will be conducted as a two-part deal. The first stage, expected to be completed in the second quarter, will involve a cash tender offer of $34 per share for 126 million shares, more than half of the outstanding Tribune shares. The remaining shares will be bought later at the same price.

The buyout has the support of two of Tribune’s largest shareholders, including the Chandler family, which has about a 20 percent stake in the company.

Tribune bought Times Mirror Co. from the Chandler family in 2000 for about $6.5 billion. In the years after the deal, Tribune’s stock began to fall, dropping about 50 percent from early 2004 until last spring. It has languished just above $30 per share for months.

Opponents of media consolidation predicted a fight with regulators, especially regarding Tribune’s cross-ownership of TV stations and newspapers in the same media market.

“There will be fierce opposition to the sale, and it will be used as a vehicle to underscore the fight over media consolidation at the [Federal Communications Commission] and in Congress,” said Andy Schwartzman, president of the Media Access Project in Washington.

Tribune Co. said Mr. Zell will use an employee stock-ownership plan (ESOP) to finance part of the deal and lower the taxes on any sale. The ESOP, which resembles a profit-sharing plan, will become the majority owner of Tribune Co. when the deal is complete. Mr. Zell will be entitled to buy 40 percent of the company’s common stock.

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