Chicago real estate magnate Sam Zell won the bidding for newspaper publisher and broadcaster Tribune Co.
Tribune, owner of leading US newspapers including the Los Angeles Times, Chicago Tribune, Newsday and the Baltimore Sun, had been pushing Zell to raise his bid, which had been close to $34 a share, Reuters reported. Zell is supporting the transaction with a $315 million investment. Tribune plans to sell the Chicago Cubs after the 2007 baseball season.
The announcement came six months after Tribune started soliciting offers last fall. Los Angeles billionaire philanthropist Eli Broad and his partner, billionaire grocery store investor Ron Burkle, had also bid for Tribune at $34 a share. However, the centerpiece of Zell’s proposal was a complex financial structure known as an employee stock ownership plan (ESOP), which is to pay for much of the deal, the New York Times said.
In the first step, Tribune will stage a tender offer for approximately 126 million shares at $34 a share. That will require taking on $4.2 billion in new debt. Zell will invest $250 million at this stage, a Tribune statement said. In the second step, which will take place if or when government approvals can be secured, the ESOP will buy the rest of the shares at $34 a share and Zell will put in another $65 million, bringing his total to $315. When the deal is complete, the ESOP will hold all of Tribune’’s then outstanding stock with Zell holding a subordinated note and warrant entitling him to acquire 40 per cent of the common stock, the company statement said.
The release said Zell will join the board upon completion of his initial investment and become chairman when the transaction closes. Tribune’s current chairman and CEO Dennis FitzSimons will remain on the board which will have an independent majority. There will be one director affiliated with Zell.
“I am delighted to be associated with Tribune Company, 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 Company.” Zell, 65, the son of refugees who fled Poland on the eve of Hitler’s invasion, is a self-made billionaire who has thrived on buying up distressed businesses. What he plans to do with Tribune is not clear, New York Times said.
“The strategic review process was rigorous and thorough,” William Osborn, a Tribune director who led the review process, said in a statement. “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.”
The company, which is also a major TV broadcaster, has been considering a buyout or the spinoff of various divisions after its largest shareholder, the Chandler Trusts, publicly aired their anger with the decline in its stock price last year.
The deal also ends the financial stake in Tribune of two great American newspaper dynasties: the McCormicks, whose patriarch, Colonel Robert R McCormick, founded Tribune in 1847; and the Chandlers, whose patriarch, General Harrison Gray Otis, founded Times Mirror in 1884 and who became the biggest shareholder in Tribune when Tribune bought Times Mirror in 2000.
