Five Years Later, Tribune Co. Defends Times Mirror Buy

By: Mark Fitzgerald At Tribune Co.'s 2000 annual meeting, Chairman and CEO John Madigan basked in the afterglow of the $8 billion purchase of Times Mirror Co. that the company confidently believed would generate profitable synergies with its truly nationwide network of newspapers and TV stations.

Five years later, Madigan's successor, Dennis FitzSimons, spent much of Tribune's annual meeting Wednesday defending the deal that seems more memorable for the circulation scandals that came with Times Mirror properties Newsday and Hoy, for unfulfilled synergies, and for a depressed stock price.

Buying Times Mirror, he told stockholders at the Swissotel in downtown Chicago, had more than doubled Tribune's size. The company's debt had declined to less than $2 billion from $5.4 billion at the time of the purchase. In its five years, he said, the deal has generated cash flow allowing Tribune to increase its dividend 64%, to repurchase more than 50 million of its shares, and to purchase three more TV stations for its youth-skewing WB Television Network.

"And we've done all this while producing ... great journalism," FitzSimons said.

But when FitzSimons listed the five "challenges" Tribune was committed to overcome, three of them were children of the Times Mirror acquisition: Restoring circulation integrity at Newsday and Hoy; driving revenue at the Los Angeles Times; and a resolution of its dispute with the Internal Revenue Service over how to treat the spin-off of the Matthew Bender publications group.

FitzSimons said the fourth challenge is to free Tribune from current regulations against same-market ownership of newspapers and broadcast. "We look for a positive outcome in the [U.S. Supreme] Court, or in the FCC [Federal Communications Commission]," he said.

FitzSimons spoke to an audience whose shares of Tribune are trading below other newspaper and media companies, and he faced harsher questioning than is usual at the company's annual meetings, where some joshing references to the performance of the company's Chicago Cubs constitute the typical Q&A sessions.

But on Wednesday, members of the Teamsters unions questioned him about employee morale and labor negotiations at Newsday, and about what one said were "conflicts of interest" among the directors. FitzSimons said all the financial dealings involving directors and Tribune were "de minimus," and that they easily met the New York Stock Exchange requirements for independent directors.

The shareholders-rights gadfly Evelyn Y. Davis trooped frequently to the microphone to press FitzSimons on everything from whether the directors had discussed selling the Cubs to the financial hit The Los Angeles Times is taking because of General Motor's decision to protest the paper's auto columnist by yanking its ads.

"We have no plans to sell the Cubs," FitzSimons said. "We see them as a very valuable asset to us, especially to our TV stations and superstation WGN." The Times was in discussions to try to get GM back in the paper, but as far as how much the paper has lost so far, he said: "That's between GM and us."

He also said the directors discuss moving from its staggered election of directors "every year," but has concluded that having two-third of the board be experienced directors from year to year "is important for a media company." At the meeting, directors Roger Goodan, Enrique Hernandez Jr., J. Christopher Reyes, and Dudley S. Taft were reelected as directors for three year terms. PricewaterhouseCoopers was selected again as Tribune's independent accountants.

Davis was rarely mollified by the answers, though she asked him to call her "Evelyn."

"And what should I call you?" Davis said to FitzSimons. "Dennis the Menace?"

"I've been called worse," FitzSimons deadpanned.

CORRECTION, May 19: An earlier version of this story stated that Tribune's 2004 revenue was four times greater than its 2000 revenue. In fact, it's Internet revenue that has grown by a factor of four. Additionally, FitzSimons cited five challenges the company must surmount, not four, as this article initially stated.