Chandler Trust Opposed Tribune Buyback, SEC Filing Shows

By: E&P Staff At Tribune Co.'s annual shareholders meeting last month, Chairman and CEO Dennis J. FitzSimons was asked if the Chicago media giant with the tumbling stock price could meet the same fate as Knight Ridder Inc., which was forced to put itself up for sale. Anything is possible, he said, but among the factors favoring Tribune's continuing independence were the significant stakes held in friendly hands such as the McCormick Foundation and the Chandler Trust holdings.

Now it appears that at least one of those big stakeholders may no longer be so friendly to top management's strategy to turn around Tribune.

In a late Tuesday filing with the U.S. Securities and Exchange Commission (SEC), Tribune revealed that the Chandler representatives on its board opposed the company's recently announced plan to take on $2 billion in new debt to buy back as much as 25% of its stock.

The filing gives virtually no details of dispute -- but reveals the first significant dissent on a board that has united through a rocky patch in which Tribune's stock has lost nearly 40% of its value in the last two years.

"The Tender Offer was approved by eight of Tribune's 11 directors, with Jeffrey Chandler, Roger Goodan and William Stinehart, Jr. dissenting," the SEC filing says. "Messrs. Chandler, Goodan and Stinehart have also advised the Company that they do not share the opinions of the Company described above. Messrs. Chandler, Goodan and Stinehart were nominated to serve on the Company's Board of Directors by the Chandler Trusts, which collectively own 12.2% of our outstanding shares."

Among the other things a leveraged buyback does is discourage a Knight-Ridder-style acquisition because the greater debt makes the company a less desirable target. Tribune has already borrowed some $1 billion to pay a tax debt it inherited in its acquisition of Times Mirror, a Tax Court judgment it is appealing.

A Wall Street Journal story by Dennis K. Berman and Sarah Ellison reported Tuesday that the Chandler directors expressed a desire to restructure the partnership they have with Tribune before the buyback plan went ahead. FitzSimons went ahead with the plan because of the favorable climate now for interest rates, the Journal reported.

The Chandler directors came to the board as a result of the 2000 purchase of Times Mirror Co., which the family controlled for generations. The family was a key to Tribune's friendly acquisition of the publisher of the Los Angeles Times and other big media properties.

For tax reasons, the Chandler Trust and Tribune formed partnerships that own Tribune stock and other assets. The Journal, quoting unnamed "people familiar with the matter," say the Chandlers want to either keep the partnerships or, depending on how they are valued, unwind them. Tribune and the trust disagree on how to value the partnerships, the Journal reported.