Tribune Co. to Repurchase $2 Billion in Stock, Make Cuts

By: E&P Staff/Associated Press The Tribune Co. said Tuesday its board approved a more than $2 billion repurchase of up to 75 million shares that would reduce its number of shares outstanding by 25 percent.

The announcement sent its slumping stock up 8 percent, rising $2.24 to $30.13 in morning trading on the New York Stock Exchange.

Tribune, whose newspaper properties include the Chicago Tribune, Los Angeles Times, and The Sun in Baltimore, said it will finance the moves using bank debt and bonds. The company expects its credit rating to be downgraded because of the higher debt load.

The incremental debt will be repaid from at least $500 million in asset sales (pre-tax), which will include certain non-core broadcasting and publishing properties as well as real estate and securities held for investment.

During a conference call with investors and analysts this morning, Tribune Chairman, President and CEO Dennis FitzSimons said to expect announcements on the asset sales in upcoming weeks and months.

Tribune's stake in the Food Network -- it holds 31% -- could be on the block, though FitzSimons said they are pleased with its cash flow. "If we could get the right price and it would be a positive event for shareholders" Tribune would consider selling, he said. Fitzsimons also confirmed the company will hold on to the Chicago Cubs.

During the call, FitzSimons said Tribune will "increase its stake in CareerBuilder." Tribune, Gannett, and Knight Ridder jointly own the online job site. Gannett and Tribune have first right of refusal over any potential buyers -- including McClatchy, which acquired Knight Ridder in March. FitzSimons was vague when an analyst questioned if Tribune was going to buy Knight Ridder's share of the company. He said discussions were still ongoing and that "McClatchy will continue to be an important partner."

Additionally, Tribune announced a $200 million cost saving plan, which includes staff reductions and the implementation of common systems for advertising, circulation, and content.

?The repurchase transactions are expected to be accretive to earnings per share and will lower Tribune's cost of capital,? said FitzSimons in a statement. ?They also allow us to optimize our capital structure while maintaining financial flexibility.?

Tribune said it will maintain its dividend.

The board authorized first the purchase of up to 53 million shares in a modified Dutch auction starting Tuesday and lasting until June 26. A so-called Dutch auction lowers the sale price of an item until it meets the highest bid. Tribune said it will offer no more than $32.50 and no less than $28 per share.

Following the auction, Tribune is authorized to purchase another 10 million shares from its principal shareholder, McCormick Tribune Foundation and Cantigny Foundation, affiliated groups that hold about 13.6 percent of the stock. The company is also allowed to then buy another 12 million shares on the open market. FitzSimons said during the conference call that the Chandler Family is considering their options.

FitzSimons also cautioned that investors "shouldn't read anything into the McCormick Foundation selling," when asked by analyst if it signaled that Tribune would not bounce back. He explained the Foundation needs liquidity to meet certain grants.

John Morton, an independent newspaper analyst in Silver Spring, Md., said the move signals Tribune's confidence in the future of its businesses. But he sees another challenging year ahead for newspaper advertising and the business as a whole, although television should have better results because of the elections.

?Probably there's not going to be any turnaround until sometime next year, and even that will probably be modest,? Morton said. ?People don't realize, though, that newspapers themselves are getting a lot of growth out of their Internet sites, and those can be highly profitable. That really is what's going to start having an impact on the overall outlook for some of those companies.?


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