Deutsche Bank Lowers Tribune Target Price On Deal Uncertainty

By: E&P Staff Deutsche Bank Securities (DBS) newspaper industry analyst Paul Ginocchio lowered the target price for Tribune stock to $32-a-share from $34 on the "probability" that the Sam Zell-led $5.2 billion deal to take Tribune private may fall in value -- or founder altogether.

Earlier this month, Tribune completed the first stage in the transition to a private ownership with an ESOP (employee stock ownership plan) by buying back 126 million shares, or about 52% of shares outstanding, from stockholders. It already faces bigger costs in its borrowing, which will be necessary to complete the final phase of the deal when it buys the remaining stock.

In a note to investors, Ginocchio noted that Tribune's May publishing revenues fell 10.3%, worse than DBS's estimate of a 7.6% decline, and a widening of April's actual performance of an 8.6% decrease. "In light of the softer-than-expected May and our reduced expectations, we lower 2Q EPS (earnings per share) from $0.51 to $0.44 (-14%) and FY07 from $2.01 to $1.85 (-10%)," the analyst wrote. He noted that since Tribune's disappointing first quarter results, DBS has cuts its estimates twice.

DBS continues to rate Tribune stock a "hold."


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