UPDATE: Tribune Board to Meet Sunday to Weigh Bids

By: E&P Staff and The Associated Press

Investors awaiting word of a Tribune Co. buyout sent the company’s stock up nearly 2 percent in afternoon trading Friday, as the a special committee of directors considered dueling proposals to acquire the media conglomerate. The intrigue and tension grew as the Tribune grew quiet on Saturday.

Late Saturday, the Chicago Tribune reported:

“Tribune Co.’s independent directors were set to meet again this weekend to decide whether to endorse Chicago billionaire Sam Zell’s $33-per-share proposal for the media company or a rival 11th-hour, $34-per-share offer from Los Angeles billionaires Eli Broad and Ron Burkle, sources said.

“The special committee of independent directors is leaning toward Zell’s plan to take the company private after taking no formal action following several hours of deliberations Friday. Sources said the committee is favoring the Zell deal in part because the offer from Broad and Burkle was viewed as less concrete.

“Tribune has been trying to meet its self-imposed deadline this weekend to reach a decision. A meeting of the full Tribune board is scheduled for Sunday, when a final decision could be voted on.

“Though the independent directors appear to be leaning toward Zell’s offer, a source familiar with the situation said a Tribune representative contacted Broad and Burkle after Friday’s committee meeting to present a series of questions concerning their proposal, indicating it was still being considered.”

The Associated Press dispatch earlier follows.
*

The Chicago-based company set an end-of-March deadline to announce results of its six-month-long strategic review. But company spokesman Gary Weitman remained silent on the status of negotiations Friday afternoon.

Tepid bidding for Tribune Co. took an 11th-hour twist Thursday night when Los Angeles billionaires Eli Broad and Ron Burkle submitted a sweetened offer for the company that owns the Chicago Tribune and Los Angeles Times.

The pair valued their offer at $34 per share, according to a person familiar with the offer who was not authorized to disclose details and asked to remain anonymous.

The joint bid put the two squarely against real estate mogul Sam Zell, whose own bid is reportedly valued at $33 per share.

The Burkle-Broad joint bid includes $500 million in cash and would use an employee stock ownership plan to raise money for a buyout. A previous bid by the duo was also valued at $34 per share and included $500 million, but did not include the stock ownership plan. It is believed that Zell was proposing to invest $300 million and use a stock ownership plan.

It was unclear Friday if Zell would update his offer, or whether the company’s board would extend its Saturday deadline to review Broad and Burkle’s bid. A spokeswoman for Zell declined to comment.

The nation’s second-largest newspaper publisher by circulation also is said to be considering a “self-help” plan that would involve spinning off the company’s broadcast division and borrowing money to pay a one-time cash dividend to shareholders.

As the Saturday evening deadline approached, everyone from Wall Street analysts to anxious journalists were left to speculate about the outcome of any deal.

“I’m certain they want to get closure sooner rather than later,” said S.W. “Sammy” Papert, head of newspaper consulting firm Belden Associates in Dallas. “From an operational standpoint, this is driving people crazy. It’s tough enough in the newspaper space right now without these distractions going on.”

Dave Novosel, an investment analyst at Chicago’s Gimme Credit research firm, said he thinks a $35-per-share offer would be enough to win over Tribune’s special committee. But so far, no one has publicly offered that much.

“Favoring the prospect of them settling this soon is that this has gone on for six months,” he said.

Tribune announced its willingness to sell all or part of the company in September after being pressured by several large shareholders angered by its lagging stock price and sagging fortunes.

Leading the outcry was the Chandler family, which owned the Los Angeles Times for decades.

Like most newspaper companies, Tribune has been struggling with declining profits, circulation and advertising revenues. Last week, the company announced revenue fell 3.4 percent in February as its publishing division continued to struggle.

Tribune’s share price fell about 50 percent from early 2004 until last spring and has languished at just above $30 for months, down from an all-time high of $60.88 in Nov. 8, 1999.

The company originally set a January deadline for offers to purchase the company, but none carried the price tag the company had hoped to attract when it began soliciting bids.

Then came a late-game bid from Zell, 65, who made his fortune reviving moribund real estate properties. Zell, who proposed using an employee stock ownership plan as a way to lower the taxes of any sale, said he had no plans to break up the company.

Specific details of how the competing offers would create an ESOP were not available, but experts said it would allow some shareholders, such as the Chandler family, to avoid a capital gains tax.

An ESOP is similar to a profit-sharing plan, but allows the company to borrow money and repay loans using pretax dollars. Payments of both interest and principal are tax-deductible and would create more leverage for a buyer.

“We think this benefit could be one of the reasons that the company has been favoring the Zell bid, as the Chandlers, the McCormick Trust, and management could all potentially benefit from this,” Wachovia Securities analyst John Janedis wrote in a research note Friday.

The renewed bid from Broad, 73, and Burkle, 53, seems to even the playing field, at least from a financial perspective.

But the board might consider other factors, including who might be a better steward, said Marty Kaplan, associate dean of the Annenberg School for Communication at the University of Southern California.

“The most important difference between their bid and Zell’s is that Broad especially has been talking about newspapers being a public trust,” Kaplan said. “They’re the ones that have talked about the importance of serving communities and journalistic standards and the need to have other masters than profit driving journalism.”

In an earlier interview with The AP, Zell said he was eyeing Tribune as an investment.

The media company also owns nine other daily newspapers, as well as 23 TV stations and the Chicago Cubs baseball team.

Tribune shares climbed 58 cents, or 1.8 percent, to close at $32.11 in trading on the New York Stock Exchange.

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