Tribune Co., already under pressure from its largest shareholder, the Chandler family, is facing a growing challenge on another front: a push by some rich and powerful citizens in Los Angeles for a sale of the Los Angeles Times to local interests.
The clamor over the nation's fourth-largest newspaper comes ahead of a Tribune board meeting Thursday, at which Chief Executive Officer Dennis FitzSimons is expected to deliver on a directive from the board to present a plan for the future of Tribune. Mr. FitzSimons and other executives have been preparing the plan even as they negotiate with the Chandlers, who formerly owned the Los Angeles Times, over the value of two complex partnerships that set off a bitter public battle between the family and Tribune management in June.
The loose collection of those interested in a sale of the newspaper includes possible billionaire buyers, Times management and civic leaders. The parties say it is unorchestrated. But all say they are concerned that further cuts could harm a prestigious newspaper, and that if Tribune persists, then local ownership may be a possible savior.
In an interview, Scott Smith, president of Tribune Publishing, said the company sees the Times and its staff as a central source of content for other Tribune newspapers, which include the Orlando Sentinel, the Baltimore Sun and the Hartford Courant. The bottom line matters too: Tribune Publishing has roughly $4 billion in annual revenue, about a quarter of which comes from the Times; the unit comprises about 75% of the company's total revenue.
"We believe there are opportunities to smartly collaborate on news coverage and editing, and we are doing that in significant ways, largely building off the talents of the journalists of the L.A. Times," he said. "All the advantages of scale clearly apply as we think about the L.A. Times as a part of Tribune. It's our largest newspaper, the largest and most diverse metro area we serve in full."
Though the groups pushing for a sale say they aren't coordinating their efforts, there are some points of contact among them. Two possible buyers, Eli Broad, philanthropist and founder of insurer SunAmerica, and supermarket magnate Ronald W. Burkle, recently sat down with representatives of the Chandler family and their investment bankers to discuss how they might structure a deal to purchase the Times from Tribune, according to people familiar with those discussions. The alliance between Messrs. Broad and Burkle developed this summer after they wrote separate letters to Tribune's board expressing their interest in purchasing the paper. People close to the Chandlers said these talks didn't go far and that the family only wants to talk to them if they are serious bidders. Discussions of a value for the Times are all over the map. Most estimates hover around $2 billion.
At about the same time, entertainment mogul David Geffen made his own separate, informal, all-cash offer to buy the Times, according to people familiar with the situation. In response to all three overtures, Mr. FitzSimons wrote a letter saying the board had decided unanimously to not discuss the transaction "at this time," according to a person who saw one copy. "If our perspective changes, we will contact you," Mr. FitzSimons wrote. People familiar with the matter said Mr. Geffen too has been in contact with the Chandlers.
Meanwhile, Los Angeles Times Editor Dean Baquet and Publisher Jeffrey Johnson have been balking at a recent request for job and cost cuts made by Mr. Smith, arguing that the paper already has made deep cuts. According to people familiar with the matter, Mr. Smith recently broached the idea of job cuts on top of roughly 300 made last year.
The Los Angeles Times is the largest newspaper in Tribune's stable, with a circulation of 851,832 at March 31, according to the Audit Bureau of Circulations, down 5.4% from a year earlier. Like many other large metropolitan daily newspapers, that circulation has been declining for years. Increasing competition from the Internet and other new media outlets has drawn away readers as well as advertising spending, leaving the newspaper industry struggling to attract readers and keep advertisers it once took for granted. The changing environment has aggravated industry consolidation, while a loss of revenue has prompted deep budget cuts at many newspapers, particularly the large and midsize metro daily newspapers that once dominated their media markets.
The Times currently enjoys a profit margin of about 20%, lower than that of its parent's flagship Chicago Tribune but higher than many metro papers. Nonetheless, Wall Street is worried about the industry's growth and has been punishing newspaper stocks, including Tribune's. At 4 p.m. in New York Stock Exchange composite trading Friday, Tribune shares were at $30.97, down nearly 38% since the beginning of 2003, when Mr. FitzSimons took over. The Chandlers emphasized that point in a June letter outlining dissatisfaction with Tribune management and the performance of their investment.
Tribune paid $5.9 billion for Times Mirror in 2000. Coming at the peak of the Internet bubble, the deal was heralded as a way to benefit from selling advertising across broadcast and newspaper platforms in the same markets. That strategy has faltered. Tribune's two primary businesses -- newspapers and television stations -- are concentrated in big-city markets that have taken a pounding from competitors. TV stations such as KTLA in Los Angeles have lost viewers, while newspapers, including both the Times and Chicago Tribune, have lost readers and advertising.
At the same time, the Chandlers, who hold a 15% stake in Tribune and three of its 11 board seats, have soured over their investment in Tribune as the stock price has fallen. In June, the Chandlers instigated a fierce public battle with Tribune management and its independent directors and have been pushing the company to break itself into pieces. In an open letter to the board, the family invoked the tradition of the newspaper and said further cost cuts would damage its quality -- a tactic some at the Times found ironic but that civic leaders have since echoed.
The growing opposition to Tribune took further shape last week. Tuesday, Mr. Baquet and his Los Angeles city-county bureau chief, Jim Newton, attended a meeting at the City Club at Bunker Hill, one of Los Angeles's exclusive business clubs, with 20 of the city's most prominent civic leaders. Among them were Elise Buik, CEO of the United Way of Greater Los Angeles, and Gary Toebben, CEO of the Los Angeles Chamber of Commerce. The purpose of the meeting, according to George Kieffer, a prominent Los Angeles attorney who organized the gathering, was to discuss how the newspaper covers regional and local issues.
At one point, Mr. Baquet noticed a group of people signing a piece of paper in the corner of the room. "I assume you're working on this famous letter," he quipped to Mr. Kieffer, according to several people who were there. "You know I can't talk about that."
The "famous letter," signed by Ms. Buik, Mr. Toebben and 18 other business leaders, was a warning to Tribune that making further cuts in the Times newsroom was a bad idea. Instead, it urged the company "to make an even larger investment in the Times and to resist the financial pressures to make cuts that would harm the paper." If Tribune couldn't do that, the letter said, "perhaps a different mode of ownership would better serve Los Angeles."
The letter was both faxed and sent overnight to the Chicago offices of Tribune's Mr. FitzSimons and copied to the company's board. The Times reported the communiqué in an article on Thursday.
The leaders who sent the letter know each other, people at the Times and prospective buyers -- but say they aren't working in concert with either the paper or the possible buyers. "I have never talked to Ron Burkle, David Geffen or Eli Broad about their interest in purchasing the paper," Mr. Kieffer said. "I have thought that I ought to contact these people and see where their interests really lie," he added. "I don't necessarily believe everything I read in the paper."
Meanwhile, Mr. Baquet has had numerous interactions with Mr. Broad, who is a frequent guest at the paper for editorial lunches to discuss things happening in the city. Most recently, Mr. Broad had lunch with Messrs. Baquet and Johnson and Michael Govan, the new CEO of the Los Angeles County Museum of Art. According to several people with knowledge of the interaction, Mr. Broad told Mr. Baquet at that meeting that he thought it would be "great" if the Los Angeles Times were locally owned. Mr. Baquet smiled, but said nothing, these people said.
As for Mr. Geffen, people close to Messrs. Baquet and Geffen said the two have never met. Mr. Baquet learned of Mr. Geffen's interest from DreamWorks Animation CEO Jeffrey Katzenberg, a close friend and associate of Mr. Geffen, at lunch a year ago, these people said.
Asked in an interview whether he is pressuring Tribune to sell the Times, Mr. Broad said, "I have no way to pressure them; but they know of my interest, they know of Ron Burkle's interest. They also have a letter from David Geffen. We aren't pressuring them in any manner. It's up to management, the board and their shareholders, what they want to do. I think the paper will be far better off with local ownership."
Besides the Chandlers, some of these shareholders are restive. "The fact that the value of the assets of Tribune significantly exceeds the current stock price is indisputable," said Charles Bobrinskoy, vice chairman of Ariel Capital, which owns roughly a 6% stake in the company. "The market seems to be betting that the board will not take action to realize that value. We at Ariel have every confidence that the board will take those steps. At this time, we are making no specific recommendation as to steps the board should take."
In its article on the letter from the civic leaders to the Tribune, the Los Angeles Times quoted Mr. Baquet on the possibility of making further job cuts. "I am not averse to making cuts," he told the paper. "But you can go too far, and I don't plan to do that. I just have a difference of opinion with the owners of Tribune about what the size of the staff should be. To make substantial reductions would significantly damage the quality of the paper."
For an editor to publicly defy management over budget cuts isn't unheard of. More remarkable was that Mr. Baquet's publisher, Mr. Johnson, joined him in resisting the push for cuts. The article quoted Mr. Johnson saying he agreed with Mr. Baquet that "newspapers can't cut their way into the future. We have to carefully balance economic realities with serving our readers." A Times spokesman said neither Mr. Baquet nor Mr. Johnson would elaborate beyond what they had told their own newspaper.
After decades in which large media conglomerates dominated the industry, "local ownership" has become a common refrain in the newspaper business in recent months. After McClatchy Co. purchased 32 papers from Knight Ridder Inc. this year, the company turned around and sold 12 Knight Ridder papers, some to local owners, such as Brian Tierney in Philadelphia, who purchased the Philadelphia Inquirer and the Philadelphia Daily News.
While buying a local paper can bring owners a powerful voice in their community, it also can prove tricky. In 2000, Wendy McCaw, who earned a sizable fortune in her 1997 divorce from telecommunications mogul Craig McCaw, bought the Santa-Barbara News Press from New York Times Co. Since then, she has seen a number of publishers come and go. This summer, much of the newsroom staff walked out and took to picket lines complaining that Ms. McCaw interfered in the editorial process.
Under the Chandlers, the Times had its glory years under famed publisher Otis Chandler in the 1960s and 1970s. In 1995, the family-controlled Times Mirror appointed Mark Willes, a former General Mills executive, as publisher. He pushed to break down the traditional barriers between the editorial and business sides of the publication, leading eventually to the paper's decision to share profit from a Sunday magazine issue with the subject of the issue, the Staples Center sports arena. The incident and subsequent uproar tarnished the paper's editorial integrity and helped spur the Chandlers to put the paper up for sale.
Since the Tribune took over, managers at the paper and in Chicago have clashed over cost cuts and strategy. "I think the Tribune has squandered its good will inside the L.A. Times newsroom," said John Carroll, a former editor of the paper, who was at the helm after the Staples debacle but left last year. "I would say that if you look at the six years Tribune has owned the Times Mirror papers, all those papers have been badly diminished. It's been a worse talent drain than anywhere I've seen."
Says Tribune's Mr. Smith: "It's a better newspaper today in many ways than when we acquired it six years ago."
On the business side of the Times, there is dissatisfaction with Tribune's latest efforts to consolidate and centralize control over strategic decisions and other initiatives, according to several people familiar with the matter. Last year, Tribune laid off roughly 300 people from the Times's staff, or about 8% of its overall work force. Internally, people express doubts over the effectiveness of Tribune's overall strategy and frustration at the Chicago company's efforts to control decision making.
--Rhonda Rundle contributed to this article.
Write to Sarah Ellison at sarah.ellison@wsj.com
