By: Morgan Stanley lowered its estimates on Tribune Co. due to reports that the media company may be nearing a settlement with the Chandler family on certain partnerships and possibly selling the Los Angeles Times.
On Friday The Wall Street Journal reported that the company is close to an agreement with the Chandlers, its largest shareholder, to break up the TMCT Ventures, a venture capital fund.
Analyst Lisa N. Monaco of Morgan Stanley said in a client note Monday that the move could allow for more restructuring, including "a spin-off of broadcasting or a sale of individual assets such as the Los Angeles Times."
Indeed, The Journal reported Monday that the company is starting to face pressure from various sources including Times management, civic leaders and wealthy potential buyers that include Eli Broad, philanthropist and founder of insurer SunAmerica, and supermarket magnate Ronald W. Burkle, to sell its flagship newspaper.
Monaco said it's possible that the breakup of TMCT could result in Tribune receiving the Tribune common and preferred equity and the Chandlers getting the real estate and investment portfolios. Making the assumption that Tribune buys back the real estate for $500 million, Monaco said the company could face the possibility of laying out almost $655 million in cash, including approximately $154 million in taxes, when the transaction is done.
"We remain 'Equal-Weight' on Tribune as we believe upside is limited from additional restructuring," she said.
Monaco lowered her earnings-per-share estimates for the third quarter to 41 cents from 43 cents, the full year to $1.90 from $1.95 and 2007 earnings to $2 per share from $2.10 on weaker-than-expected newspaper trends.
Tribune shares gained 8 cents to $31.05 in morning trading on the New York Stock Exchange.
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