Report: Zell Bid For Tribune Co. Faltering

By: E&P Staff

The ESOP Chicago real estate billionaire Sam Zell proposed for taking Tribune Co. private is no longer the flavor of the month, according to a report Thursday in the Chicago Tribune.

Quoting “several sources close to the situation,” Tribune staff reporter Michael Oneal reported that Zell’s $13 billion deal to take Tribune private through an employee stock ownership plan (ESOP) “may be losing momentum.”

The Tribune reported that Zell’s proposal “may have too little equity supporting too much debt” to have a chance of persuading Tribune’s board. The board has set a March 31 deadline to decide on the future structure of the Chicago media giant. So far, the auction process has attracted only a few bids, all of which would add even more debt to a company that is already heavily leveraged because of an aggressive stock repurchase plan and a loan to pay off a big tax assessment.

Zell’s proposal initially won favorable attention by Tribune directors, according to previous reports, because the ESOP’s tax advantages could boost the sale price.

The other reported bid comes from Tribune management. It would spin off Tribune’s television stations, and offer a special dividend funded by more debt.

But, as the Tribune points out Thursday, the management plan does not solve the problem of what to do with the restive Chandler family stakeholders, who put the auction process in motion. The Chandlers, who own 20% of the company, are unhappy with the stock price, but are also famously averse to paying capital gains taxes.

Quoting an unnamed Tribune executive, the article reported: “‘After crawling over all this glass, have you achieved stability and harmony in the boardroom?’ this source asked. Without settling the Chandler problem, the executive added, the answer is probably no.”

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