Bidding War for Tribune Co.
By James T. Madore, Newsday, Melville, N.Y.
Mar. 30–A last-minute bidding war among billionaires for Tribune Co., the parent of Newsday, broke out yesterday with Eli Broad and Ron Burkle submitting a higher offer than the leading contender, Samuel Zell.
A source familiar with the situation said Broad and Burkle, both of California, had revised their earlier bid to include an employee stock ownership plan and an unknown amount of borrowing. The duo also recommitted to chipping in $500 million in cash, the source said.
The revised Broad-Burkle plan calls for shareholders to receive $34 a share, the source added. That’s up from the $27 the pair offered in mid-January. It also is $1 more than what real-estate mogul Zell has offered.
Both bids, however, represent a modest premium over yesterday’s stock-market close of $31.53 a share.
It was unclear how Tribune board directors would respond to the letter sent them last night outlining the Broad-Burkle counteroffer or whether tomorrow’s deadline for an announcement of future actions would be postponed.
Spokesmen for Tribune and Broad declined to comment. Representatives of Burkle and Zell didn’t return calls.
The move by Broad and Burkle came after Tribune provided them with the additional information they demanded last weekend. The duo had accused Chicago-based Tribune of showing favoritism to Zell, who lives in Chicago, by providing the data needed to propose an employee stock ownership plan.
The pair’s bid in January was criticized by stock analysts because it called for Broad and Burkle to receive a stake of more than 30 percent in return for only $500 million in cash and the borrowing of $10.8 billion. Analysts said Tribune, facing declining revenue because of competition from the Internet, couldn’t sustain such a huge debt burden.
Broad and Burkle’s renewed interest in the Tribune auction was sparked by their allegation that Zell was given preferential treatment and last week’s opinion-page fiasco at the Los Angeles Times, where the editorial page editor resigned in protest over allegations of a conflict of interest, according to a source familiar with Broad’s thinking.
That source said, “They love the Times and feel Tribune is running it into the ground.” The duo originally sought to buy just the Times last year and was rebuffed by Tribune executives who required bids for the entire company or one of its operating divisions.
Zell’s proposal to take the company private with about $300 million in cash and $12.7 billion in debt has alternately impressed Tribune’s directors and frightened them, sources said. The centerpiece is a new employee stock ownership plan, which would control Tribune and receive sizable tax benefits for paying down the debt from the transaction. But the arrangement could potentially put jobs and pensions at risk.
In addition to the two bids from billionaires, another proposal under consideration is from Tribune’s top brass. They want to split the company’s nine newspapers from its 23 television stations and pay a sizable dividend to shareholders, which would allow the largest investor, the Chandler family of Los Angeles, to exit.
People familiar with the ongoing auction said Tribune directors would meet today to discuss a course of action. They may meet tomorrow as well. Having extended the auction before, Tribune is loath to blow another deadline for an announcement. But the revised Broad-Burkle bid could require some time to analyze and receive feedback from investment advisers, a source said. “If they go beyond March 31 by a few days, I don’t think anyone would complain, especially if they got a buck or two more,” the source said.
Jack Myers, editor and publisher of Myers Business Media Report in Manhattan, said that if Tribune is close to taking Zell’s bid, it may be matter of deal fatigue. “I have a sense it’s one of those things that gets to a point where people are so sick of it they kind of give in at the end of the day,” he said. The auction began last fall.
Myers called Zell “a bottom fisher who looks for assets that are undervalued. I’m not sure he has the ability or the skills to take these assets and make them more valuable.”
But Mike Simonton, a bond analyst at Fitch Ratings, disagreed. “We do think Zell’s bid could be compelling to the board given his history in turnaround situations, his Chicago connections and his history of being a visionary,” he said.
If the new Broad-Burkle bid prolongs the process a couple of days, he said, he doesn’t believe the process would be hurt.
Staff writer Mark Harrington contributed to this story.
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