Tribune Co. Takes Zell’s $8.2 Billion Offer

Tribune Co., which owns the Chicago Cubs baseball team, the Chicago Tribune and the Los Angeles Times among other things, has accepted a $8.2 billion buy-out offer from billionaire Sam Zell. This is a blow to the other bidders, Los Angeles billionaires Eli Broad and Ron Burkle, who will have their money for consolation. Tribune says it will sell off the Cubs at the end of the season, and Zell’s deal should be final sometime in the fourth quarter.

Ashley M. Heher of the Associated Press explains, “The buyout will be conducted as a two-part deal, the company said. 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 purchased later at the same $34 per share price.” The Broad-Burkle offer was also at $34 per share, so it came down to which the board preferred.

William Osborn, a Tribune director who led the review process, said the usual piffle in a statement, “The strategic review process was rigorous and thorough. We determined that this course of action provides the greatest certainty for achieving the highest value for all shareholders and is in the best interest of investors and employees.” Mr. Zell equaled that in his own statement, “"I am delighted to be associated with Tribune Company, which I believe is a world-class publishing and broadcasting enterprise. As a long-term investor, I look forward to partnering with the management and employees as we build on the great heritage of Tribune Company.”

Ms. Heher also reported, “Tribune said Zell will use an employee stock ownership plan 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 once the deal is complete. Zell will be entitled to buy 40 percent of the company’s common stock . . . . An ESOP allows the company to borrow money and repay loans using pretax dollars. Payments of both interest and principle are tax-deductible and would create more leverage for a buyer.”

What the deal really means is Tribune is getting busted up and Mr. Zell is going to be running a purer media operation. Although it could still fall apart, there is now a $25 million penalty in place that Tribune would have to pay Mr. Zell if it takes someone else as a partner. There are, however, still the regulatory approvals necessary from the FCC, since some TV stations and newspapers in the same markets are involved. The government won’t be too concerned, however, since Tribune has been operating these with waivers. What’s good for one owner should be good for another. That said, maybe the waivers aren’t good for the country.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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