Tribune Co. Buyout Advances
Shareholders Embrace Offer Despite Credit, Debt Concerns

By Frank Ahrens
Washington Post Staff Writer
Wednesday, August 22, 2007

Tribune Co. shareholders overwhelmingly approved real estate billionaire Samuel Zell's offer to take the company private yesterday, despite the ongoing credit crisis and the deal's heavy dependence on debt.

In a meeting at the media company's Chicago headquarters, about 97 percent of the votes cast favored Zell's bid, which the company accepted in April. Zell has proposed a deal in which the $3 billion company goes private and creates an employee-ownership structure with Zell as chairman and 40 percent owner.

Tribune, which has 11 television stations and 23 newspapers, including the Chicago Tribune and the Baltimore Sun, was forced onto the auction block last year by a faction of owners and board members disappointed with the company's performance.

When the company drew little interest -- Tribune was facing a self-help deal that would have involved liquidation -- Zell swooped in with his offer in February. Zell was flush with cash after selling his Equity Office Properties, a chain of office buildings, to private-equity firm Blackstone Group last November for $36 billion.

Zell offered $34 per share for Tribune stock, a premium on its trading value at the time of his bid. After the board voted to accept the bid, Zell's buyback offer was met with such shareholder enthusiasm that the company could not satisfy demand, making yesterday's vote largely pro forma.

Zell's deal for Tribune would load the company with $13 billion in debt even as commercial loans on favorable terms are becoming harder to get. Further, the company had projected a cash flow of at least $1.3 billion this year -- instrumental in paying down debt -- but the poor newspaper advertising climate means that figure will almost certainly not be met. To pay down debt, Tribune said it would sell its Chicago Cubs baseball team.

Despite the gloomy debt forecast, the 65-year-old Zell remains upbeat on the deal.

"I believe Tribune Co. is reasserting itself as a national leader in news generation and distribution," Zell said in a statement yesterday. "Despite the recent upheaval in the credit markets, my view of the company as an investment has not changed."

Zell did not attend yesterday's meeting at the Tribune Tower.

Zell visited the company's largest newspaper, the Los Angeles Times, last week, and gave a well-received pep talk to employees.

The Tribune deal is expected to close by the end of the year, but it still must be approved by the Federal Communications Commission, which has rules preventing one company from owning a newspaper and a TV station in the same city, as Tribune does.

Tribune has received FCC waivers to continue such ownership, but the Media Access Project, which opposes large media consolidation, has petitioned the FCC to reject the Tribune deal, saying the waivers should not be renewed.