Cross-Ownership Muddies Tribune Sale
Friday, November 3, 2006
The Tribune Co. eyes an uncertain future as it sorts through bids from potential buyers. One thing is clear, however: Any new owner faces numerous regulatory hurdles and is going to spend plenty of time and money in Washington and in court.
The Chicago-based media giant owns 11 television stations and 25 newspapers, some in the same city -- a violation of Federal Communications Commission rules on what it calls "cross-ownership."
Tribune has received FCC waivers that allow it to keep the properties in violation, at least temporarily. But those waivers will not convey to a new owner. And any new owner will face continued waiver challenges from advocacy groups that oppose media consolidation. The first challenge was filed with the FCC yesterday.
Meanwhile, Tribune may be sending mixed signals about its plans, perhaps as a negotiating tool. Reports yesterday said Tribune has told some potential bidders it now is considering breaking up the company and selling it piece by piece, as opposed to selling it as a unit.
But one bidder who wants to buy only the Baltimore Sun said he heard the opposite from Tribune yesterday. "The call was from one of their investment bankers saying they got our correspondence, that the board is aware of our interest and that they are still exploring the big picture," Baltimore businessman Ted Venetoulis said. "They said to sit tight."
Also yesterday, Hollywood entertainment mogul David Geffen, who has expressed interest in buying the Los Angeles Times, sold a Jackson Pollock painting for $140 million, according to a source with knowledge of the sale. The move excited speculation that Geffen is raising money to make a bid for the Times.
Tribune has been split by a boardroom insurgency. A minority of directors, unhappy with the company's performance, has agitated for a sale or breakup of the company, believing its value will be increased.
Though the company has several big-money properties, the looming regulatory struggles may prove a drag on total company value -- a cost that potential buyers must include when putting a price tag on Tribune.
"That could be a huge factor," said one veteran Washington communications lawyer who spoke on condition of anonymity because he may work on newspaper deals in the future, though he is not now connected to Tribune or any potential buyer. "It's a real issue."
"Anybody looking to buy the whole [Tribune] package is buying a lot of uncertainty," said Andrew Jay Schwartzman, president of the Media Access Project, an advocacy group that generally opposes media consolidation and filed a petition yesterday to block Tribune's waiver in Los Angeles, where it owns television station KTLA.
Since 1975, the FCC has forbidden the same company from owning a newspaper and a television or radio station in the same city, in the interest of diversity.
Existing situations that violated the new rule were given waivers. One is in Chicago, where Tribune owns the Chicago Tribune and WGN television and radio stations.