Chandlers, L.A. billionaires vie for Tribune

By Megan Davies and Robert MacMillan
Reuters
Thursday, January 18, 2007; 1:47 PM

NEW YORK (Reuters) - Tribune Co.'s (TRB.N) biggest shareholder and a group led by two Los Angeles billionaires have submitted rival bids for the company priced at only a small premium, reflecting concerns over the future of the newspaper industry.

Tribune's board now has at least two sharply different, and some say underwhelming, bids to consider.

One proposal came from large Tribune shareholder Chandler Trusts, which would break the company up by taking the newspaper assets private, according to a regulatory filing on Thursday.

The other, from billionaires Eli Broad and Ron Burkle, takes the form of a leveraged recapitalization, a source familiar with the situation told Reuters on Wednesday.

Representatives for Tribune, Burkle and Broad were not available for comment. A spokesman for the Chandler Trusts declined to comment.

Under pressure from unhappy shareholders worried about declining newspaper circulations and weak advertising sales, Tribune, which owns the Los Angeles Times and the Chicago Cubs baseball team, had invited buyout proposals in an auction that closed on Wednesday afternoon.

While the premiums offered were relatively small, there had been concern that the auction might not draw any offers at all after several private equity firms looked at Tribune and decided to pass on the auction.

"Lo and behold, there is a Santa Claus," Benchmark Co. analyst Edward Atorino said.

Although few potential buyers have shown interest in making big investments in a struggling industry, publishing nonetheless offers strong cashflow and prestige for owners.

Neither Tribune bid is as high as what some analysts had expected. But Atorino said: "There may be some room for negotiation here to squeeze out another buck or two (per share)."

The Chandlers' bid, which would separate Tribune's publishing and broadcast businesses, values the company at $7.6 billion, based on $31.70 a share, a 4.5 percent premium to its Wednesday closing price.

The Chandlers' said in their filing with the U.S. Securities and Exchange Commission that they were "working in conjunction with two private equity firms" although they did not name them.

The proposal from Broad and Burkle offers a higher 12-percent premium of $34 a share, according to the unnamed source, valuing the company at $8.2 billion.

Shares of Tribune rose nearly 2 percent to $30.87 in New York Stock Exchange trade on Thursday.

Some analysts said the bids were not high enough for the Tribune board. After all, the stock had hit a year high of $34.28 last September, after the company said it would explore its options.

"We do not feel the board will find either of these proposals very compelling, suggesting it may pursue further negotiations to extract more value," Dave Novosel, an analyst at Gimme Credit, an independent research service, said in a note to clients.

INFLATED STOCK

In the Chandler proposal, which took the form of a letter to Tribune's bankers, the family defended its buyout price by stating that stock would be trading today at only $27 a share if expectations of a deal had not inflated the shares.

The Chandler proposal calls for shareholders to get $19.30 in cash and all the outstanding stock of a new company that would contain Tribune's broadcasting business. The newspaper business, the weaker of the divisions, would be controlled by the Chandlers. Their bid expires on January 31.

"The spin-off of Tribune Broadcasting as a separate company will unlock substantial value for Tribune stockholders other than the Chandler Trusts and is an important component of our overall proposal," said the letter, signed by William Stinehart Jr., a co-trustee for the trusts and a Tribune board member.

Acquiring the newspapers would mark an unexpected return to publishing for the Chandlers. The family owned and ran the Los Angeles Times for more than a century before selling it, along with Times Mirror Co., to Tribune in 2000 for $8.3 billion.

Burkle and Broad's offer is made up of a $27 dividend and equity valued at $7 a share. They propose to put $500 million of their cash into Tribune in exchange for about 30 percent of the newspaper and broadcasting group, the source said.

Existing management would run the company, but Burkle and Broad may take board seats. As there would be no change of control, such a deal would be completed more quickly than a pure takeover, the source said. Tribune would continue to be publicly traded.

Grocery magnate Burkle owns private equity firm Yucaipa. Broad founded home builder KB Home (KBH.N).

(Additional reporting by Paul Thomasch)

© 2007 Reuters