Tribune Bidders Chart Three Divergent Paths
Friday, January 19, 2007
Tribune Co.'s media empire now has three suitors: two with designs on the entire newspaper-television conglomerate, and a Washington private-equity group keen on its television stations only.
The Chandler family, which owns 20 percent of Tribune, and two Southern California billionaires met the Wednesday night deadline for bids on the company, offering radically different visions for Tribune and two timelines for achieving them.
Also coming in under the wire was District-based Carlyle Group, which bid for Tribune's 25 television stations, said a source who spoke on condition of anonymity because the process is ongoing. Carlyle has $47 billion under management and has been eyeing Tribune for months.
The Chandlers, who have three seats on Tribune's board, bid to buy back greater control of the company by spinning off Tribune's 26 television and radio stations and taking the 11 newspapers private, according to Securities and Exchange Commission filings disclosed yesterday morning.
The family, which would partner with two undisclosed private-equity firms, would retain Tribune's newspapers, including the Los Angeles Times, Chicago Tribune and Newsday. Debt financing would be provided by Citicorp North America, Goldman Sachs Credit Partners and Merrill Lynch Capital.
A rival bid from investors Eli Broad and Ronald Burkle would recapitalize the company with $500 million of their own money and more than $10 billion in debt, keep the company public, and sell off "non-core" assets, such as the Chicago Cubs and Wrigley Field, according to another source familiar with the bid who spoke on the condition of anonymity because the process is ongoing. In its filing, the Chandler family valued the Cubs at $558 million.
Tribune's board will consider the bids and make a decision by the end of March, the company has said.
The Broad-Burkle bid would pay shareholders $27 a share, $3.90 less than yesterday's closing price. Such a leveraged recapitalization is often used to fend off takeover bids because, after the recapitalization, a company's stock price typically drops significantly, making it a less-appealing target.
In a letter from Broad and Burkle to Tribune, they said that if their bid was accepted, they expect Tribune stock eventually to trade at $7 per share and possibly as high as $12 per share within four years, according to the source. Debt financing will be provided by J.P. Morgan Securities and UBS Securities, the source said.
The letter said the Broad-Burkle team has completed its due diligence and could close the deal within 30 days from the time it is signed.
Under the terms of their proposal, Broad and Burkle would own about 33 percent of the company and gain six seats on a Tribune board that would expand to 16 members from 11. Both would be "non-executive co-chairmen" and receive no compensation.
The Chandlers were longtime owners of the Los Angeles Times and the former Times Mirror Co. They came into the Tribune Co. when the company bought Times Mirror in 2000. With their bid, the Chandlers would reenter the newspaper-only business.
The Chandlers began complaining about the company's stock performance last year and pushed the board to essentially put the company up for sale in September.
The Chandlers said their proposal would value Tribune stock at $31.70 a share. The Chandler filing acknowledged that the group has not completed its due diligence and did not predict a date for the deal's closing if signed.