L.A. bidders not giving up on Tribune

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Eli Broad and Ron Burkle continued to sharpen their pencils Tuesday.

The billionaire duo, seeming losers just one day earlier in the bidding war for Tribune, were meeting with advisers from investment bank UBS in Los Angeles to find some way of staying in the hunt for the Los Angeles Times parent. A source close to the duo declined to detail what was being discussed, but the parties apparently were huddled over how to sweeten their $8.2 billion offer for the company.

On Monday, Tribune said it was accepting an offer for that same amount from Sam Zell after the Chicago real estate magnate raised his previous bid to match the Broad-Burkle offer and win the day. The Tribune board voted to accept the Zell offer late Sunday following a weekendlong session capping a six-month auction of the company.

But there was a good-size loophole in the approval: The board still would consider any further offers for Tribune and would only have to pay Zell a modest $25 million breakup fee if it chose not to finalize his purchase of the company.

The Zell offer -- and the failed Broad-Burkle offer -- value Tribune at $34 a share. But it was unclear whether Broad and Burkle could elbow their way back into the action with a sweetened offer of, say, $35, as the board of Chicago-based Tribune reportedly favored a Windy City buyer for its group of 11 newspapers and 23 radio stations.

The company also said Monday that it would be looking to sell its Chicago Cubs baseball team by year's end.

The Zell bid would maintain Dennis FitzSimons' title as CEO but give the board chair to the new owner. Both the Zell and Broad-Burkle bids are based on employee stock-ownership plans, which would tie majority ownership of a newly private Tribune to employee pension funds.

Wall Street reaction to the previous day's sale announcement appeared cautiously positive. Tribune shares climbed 70 cents during the session after the deal with Zell was accepted, then slipped 13 cents Tuesday to close at $32.68.

"The transaction leaves little room for error, particularly in this challenging newspaper operating environment," Goldman Sachs analyst Peter Appert wrote in a research note Tuesday.

Regulatory issues have hounded current Tribune management, but it's unclear if the new owners will sell select assets to put those issues to rest. For example, its continued ownership of both the Times and KTLA-TV in the same market would require a waiver from the FCC, and some have suggested that broadcast assets in cities with such overlaps could be sold off under Zell.

Yet another scenario for continued bidding on Tribune assets involves some local interest in Los Angeles for a spinoff of the Times. But despite such interest from Hollywood's David Geffen and others, the newspaper might provide too much vital cash flow to Tribune for any owner of the media group to part with the Times.

Like his rival bidders, Zell is a multibillionaire, but relatively little of his considerable net worth will be on the line should the famously blunt-speaking businessman successfully conclude his purchase of Tribune. Zell has pledged only $315 million of his own money in his bid and will be entitled to buy 40% of the company's common stock.     n
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