Tribune sticks with homer, accepts Zell's $8.2 bil bid

Chicagoan matched Broad-Burkle

A Chicago billionaire beat a pair of local entrepreneurs with an $8.2 billion bid that has captured the Windy City parent of the Los Angeles Times — for now.

Los Angeles-based billionaire financiers Eli Broad and Ron Burkle still could dig deeper and up their offer for Tribune, though the media group's board Monday announced its acceptance of a bid by real estate tycoon Sam Zell.

Zell and the Broad-Burkle camps each rejiggered their offers once previously, with the former ultimately holding sway Sunday after agreeing to match a $34-per-share offer from the latter.

In separate moves also announced Monday, Tribune said it will seek buyers for baseball's Chicago Cubs and a 25% stake in Comcast SportsNet Chicago by year's end. Estimates value the Cubs at north of $600 million, and Tribune said it will use proceeds to pay down debt.

Zell's bid involves a personal investment of $315 million and the use of an employee stock-ownership plan and accompanying tax breaks. The ESOP would become the majority stakeholder once the company is taken private and the transaction completed in the second quarter.

A colorful businessman with no media experience who sold his real estate company to the Blackstone Group for $23 billion in February, Zell would become chairman of Tribune, the nation's second-largest media group after Gannett. He is entitled to purchase 40% of existing common shares as part of the transaction. Dennis FitzSimons will remain CEO and a member of the board.

Tribune owns 11 newspapers and 23 TV stations. The company has been conducting a strategic review since September under prompting from Los Angeles' Chandler family — former Times owners and continuing Tribune shareholders.

The Chandlers, who control a 20% stake in Tribune, reportedly have agreed to back the bid from Zell, who would get a relatively modest $25 million breakup fee if the company decides not to complete the transaction for any reason. If completed, the transaction would leave the company with an estimated $13 billion in debt.

Tribune had set deadlines of Dec. 31 and then March 31 for completing its strategic review. In the end, officials expressed pleasure with results of the extended process.

"The strategic review process was rigorous and thorough," said William Osborn, the Tribune director who supervised the review. "We determined that this course of action provides the greatest certainty for achieving the highest value for all shareholders and is in the best interest of investors and employees."

Critics of Tribune's owning TV stations and newspapers in the same individual markets, including Los Angeles, pledged to oppose regulatory approval of the Zell sale.

"I am delighted to be associated with Tribune Co., which I believe is a world-class publishing and broadcasting enterprise," Zell said. "As a long-term investor, I look forward to partnering with the management and employees as we build on the great heritage of Tribune Co."

Newspaper analyst John Morton of Morton Research said the Broad-Burkle bid essentially lost to the home team.

"Chicago won, let's put it that way," Morton said. "When this thing began, it was the intention of the Chicago-centric directors and management to keep this company whole, (and) they wanted it to continue more or less in its current form. I'm also sure they were attracted by the fact that Mr. Zell is from Chicago."

Since September, Los Angeles suitors, including David Geffen, had tried to buy the L.A. Times from Tribune in a more narrowly drawn transaction. But the newspaper contributes too much corporate cash flow for Tribune ever to consider such overtures seriously, Morton said.

Geffen told the Times on Monday that he still would be interested in buying the paper but didn't know if Zell would be willing to sell. Morton said Zell would be likely to keep Tribune's portfolio of businesses roughly intact, though he might be tempted to sell off selected broadcast assets deemed to be nonvital.

What the Zell deal might mean for the Times or its employees will take time to sort out. Under current Tribune management, newsroom layoffs at the newspaper have been so controversial as to prompt former editor Dean Baquet to resign in November.

Once installed as chairman, Zell's mission will be to exploit whatever synergy the Tribune mix of business has to offer in a manner more profitable than its previous owners. Tribune acquired the Times and the Times Mirror publishing group in 2000 on the premise it would serve as linchpin for a synergistic set of newspaper and broadcast properties.

But regulatory issues and other problems doomed the effort, and company shares have languished. Seven years later, all of Tribune has fetched about the same amount the company paid to acquire the much-smaller Times Mirror group.

Tribune shares surged 70 cents, or 2.2%, to close at $32.81 on Monday.
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