No Bidders Announced for Tribune Co.
Thursday, January 18, 2007
Three prominent private-equity partnerships declined to bid on the troubled Tribune Co. media empire as the company closed its four-month auction yesterday, dealing a blow to some board members who had agitated for a sale as a way of raising the company's value.
Bain Capital, a partnership between Thomas H. Lee Partners and Texas Pacific Group, and a consortium of Providence Equity Partners, Dearborn Partners and Apollo Management had kicked Tribune's tires in recent months. All dropped out in the end, sources confirmed, as concern continued about declining newspaper readership and advertising revenue.
It was unknown whether a pair of Los Angeles billionaires met yesterday's deadline to bid for the entire company. Philanthropist and former home builder Eli Broad and supermarket magnate Ronald Burkle had expressed interest in buying Tribune's largest paper, the Los Angeles Times, but for tax reasons, Tribune resisted selling the company piecemeal. Broad and Burkle would have bought the company, and probably sold its assets other than the Times.
Neither Broad nor Burkle commented yesterday, but conflicting reports swirled around them. On the one hand, there was no evidence that they ever sought financing for a bid, said an industry source who spoke on the condition of anonymity because the process is ongoing.
But another industry source said Broad and Burkle planned to bid for Tribune yesterday. That source also spoke on the condition of anonymity, for the same reason.
In addition to the Times, Tribune owns 15 newspapers, 26 television stations, one radio station, the Chicago Cubs baseball team, CareerBuilder.com and other Internet properties. The company is valued at about $7.2 billion.
Tribune would not comment on the passing of yesterday's deadline. The board of directors has appointed a special committee to review bids and make a recommendation to directors, who set a deadline for action by the end of the first quarter, the company said.
If Tribune receives no bids, the company unexpectedly could regain some stability after months of turmoil.
Tribune essentially put itself up for sale in September, after a boardroom fight between the Chandler family and other directors. The Chandlers, longtime owners of the Los Angeles Times, came to Tribune in 2000 when Tribune bought the Times' parent company, Times Mirror.
Before the Chandler revolt, Tribune management had rolled out a plan to raise the company's stock price by buying back stock and selling non-core assets. The company is likely to return to that path, according to industry observers.
In early 2006, the Chandlers began expressing disappointment over Tribune's stock performance and agitated for a sale or breakup as a way of unlocking company value and possibly cashing out their stake. The Chandlers then forced the board to set a deadline for examining sale options.
Tribune stock dropped below $28 a share last spring, then rose to $34 after the company agreed to explore a sale. The share price has since declined, and closed yesterday at $30.34, down 18 cents. After initial feelers, Tribune aroused little significant interest from potential bidders, who could not see paying the premium -- as much as $40 a share -- that the Chandlers had hoped for.
The Tribune buyback proposal guaranteed a price of $28 to $32 per share. Broad and Burkle considered making offers that matched that price, according to a source with knowledge of the process who requested anonymity.
One crucial turning point in the Tribune's auction was the surprise bargain-basement sale of the Minneapolis Star-Tribune in December, which scared many bidders away, according to one industry source.
California newspaper chain McClatchy sold the Star-Tribune to private-equity firm Avista Capital for $530 million -- less than half the $1.2 billion McClatchy paid for the newspaper in 1998. Before the sale, a member of one of the equity firms told the source that his firm would bid on Tribune. After the Minneapolis sale, the firm pulled out, the source said.
"This is not a great time to be selling," said newspaper analyst John Morton. "Particularly big-city newspapers."
Newspaper growth in recent years has come from small papers, in areas underserved by national mass media. That worked against the Tribune, which pursued a strategy of having the biggest newspapers and television stations in the largest cities. Morton said the strategy was derailed by a combination of the 2001 advertising recession, media-merger restrictions and the explosion of new information sources such as the Web.