By: Mark Fitzgerald and Associated Press Reports Tribune Co. shareholders, in its final meeting as a public company, overwhelmingly approved the $8.2 billion buyout of the media conglomerate on Tuesday, but the transaction still needs financing and federal waivers.
Preliminary results indicated 97 percent of those casting votes approved the deal led by billionaire Sam Zell, marking the simplest step remaining in the torturous path to new ownership that began when the ailing newspaper publisher put itself up for sale last year.
The owner of 11 daily newspapers, 23 TV stations and the Chicago Cubs still needs the Federal Communications Commission to grant it waivers from rules banning same-market ownership of television and newspapers. After that, it will have to navigate in a troubled newspaper industry while under a huge and increasing debt burden.
The 39-minute meeting in a drab room inside the cathedral-like Tribune tower was extended only by persistant questions from Teamster Union officials and members who criticized the structure of the deal.
Perhaps 100 people showed up for the special meeting. Zell, who will become chairman when the deal closes, did not attend. Current Tribune chairman and CEO Dennis FitzSimons said Zell had a "prior commitment."
About a dozen people spoke during the question and answer period, most of them questioning the structure of the deal which creates an Employee Stock Ownership (ESOP) but which they say gives workers no voice in the company's future governance.
"What they should have is cooperative effort between employees, who are supposed to be the owners of the company, and the management team -- but employees have no voice, " George Tedeschi, president of the Teamsters' Graphic Communications Conference, told E&P after the meeting.
Talking to Scott Smith, president of Tribune Publishing Company and publisher of the flagship Chicago Tribune, Tedeschi said, "With all due respect, Tribune has a top-down management style."
Other union officials expressed doubt about the future of employee pension benefits -- and even whether the $5 billion going-private deal will be finalized.
FitzSimons said Tribune had financing commitments "by four of the world's largest financial instituations," and that the highly leveraged deal would close by the end of the year as envisioned when it was announced on April 1.
In May, Tribune borrowed $7 billion to complete the first part of the transaction by buying about half the shares outstanding at $34 per share. The company expects to borrow another $4.2 billion to complete the final step of the transaction. On Monday, Standard & Poors cut Tribune's corporate credit rating further into junk territory, citing concerns about its ability to perform in a troubled newspaper industry.
"As a private company we will have greater flexibility to transform our publishing and interactive businesses with an eye to long-term growth," FitzSimons said.
FitzSimon also defended the ESOP structure, saying the employees' representative, Great Banc Trust Company, "Has already done a great job for employees by buying shares at $28 a share, as opposed to the $34 Sam Zell paid for shares."
While Sam Zell was not present at the meeting, former chairman and CEO John Madigan was. It was Madigan's audacious purchase in 2000 of Times Mirror Company -- applauded by Wall Street at the time -- that in many ways put in motion the events that culminated on Tuesday with the 160-year-old company ending a 25-year period as a public company.
As part of the sale of Times Mirror, the controlling Chandler family got a significant stake in Tribune and seats on its board. The family in the spring of 2006 went public with its dissatisfaction about the stocks' performance -- ultimately leading to a protracted auction that ended with Zell, a newspaper industry outsider, as the only serious bidder.
Zell reportedly has assured associates that he intends to complete the deal, and will not seek a lower stock purchase price in its final step.
Teamster official Tedeschi, though, said he had his doubts about the leverage buyout, "I think there is a lot of risk in the deal," he told FitzSimons. "This is not a slam dunk, and a lot of serious analysts agree."
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