Tribune Mum On Board Dissension, Analysts Calculate Break-Up Value

By: Mark Fitzgerald With dissension from Chandler family board members now out in the open and analysts declaring that the company may be in play, Tribune Co. said Thursday it will go ahead with its $2 billion stock buyback.

"The company is proceeding expeditiously with the tender offer, which will conclude on June 26," Tribune said in a statement.

Meanwhile, in a note to investors entitled "Have the Chandlers put TRB in play?", Steven N. Barlow and other analysts with Prudential Equities Group calculated that broken up Tribune would be worth $43 a share. The stock traded at $31.54 at 10:20 EDT Thursday, up $1.25 from its opening price.

Barlow's note also said Prudential analysts "don't feel the Dutch Auction process is going to proceed and would be moot if the stock closes over $32.50 on June 26th."

Also Thursday, The Wall Street Journal reported the Chandler families and Tribune are seriously considering spinning off the company's broadcast group, and restructuring in a way that "could pave the way for the eventual sale of the rest of the company."

Citing unnamed "people familiar with the situation," reporters Sarah Ellison and Dennis K. Berman said the Chandlers -- whose board representatives voted against the stock buyback championed by Chairman and CEO Dennis FitzSimons -- and Tribune management both agree on the goal of spinning off Tribune's broadcast group, which includes 26 TV stations.

The two sides disagree, however, on the timing of the move, and the value of the so-called Chandler Trusts. The trusts were first structured for tax purposes when the Chandlers ran Times Mirror. Tribune inherited its share of the trusts when it bought the chain in 2000.

The Chandler Trusts are the second-largest stockholders in Tribune with a 12.2% stake, and had been considered one of the bulwarks against the kind of unhappy shareholder pressure that led to the sale of Knight Ridder Inc.

The board dissension came to light this week in a U.S. Securities and Exchange Commission (SEC) filing. Tribune has refused to comment on the dissension, and in its statement Thursday said, "As has been our long-standing policy, we will continue to decline comment on private board discussions."

In its sum-of-the-parts analysis, Prudential calculates that Tribune's publishing group would sell for 10 times EBITDA (earnings before interest, taxes, depreciation and amortization) while the broadcasting group would go for 12 times EBITDA.

The Chicago Cubs could be worth $500 million, Barlow said.

FitzSimons in past interviews has said Tribune -- which has pledged to sell "non-core assets" outside of Chicago, New York and Los Angeles -- is not putting the Cubs up for sale.

After the surprise buyback announcement last week, Prudential's Barlow upgraded Tribune stock to "overweight," meaning its total return is expected to exceed the average total returns of all stocks covered by the analyst.