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Tribune to Consider Selling Some Media Assets
The Tribune Company said last night that it would consider selling any or all of its 11 newspapers and 25 television stations, a move that could reshape the media landscape. The properties include The Los Angeles Times, The Chicago Tribune and The Baltimore Sun.
The announcement came yesterday after the board approved an agreement between the company and the Chandler family, its largest shareholder.
Tribune appointed a committee “to oversee management’s exploration of alternatives for creating additional value for shareholders” and cleared the way for a range of outcomes, including the sale of individual properties, the breakup of the company, or taking it private. Tribune’s assets also include the Chicago Cubs.
No decisions were made, but the company said it expected its exploratory process to conclude by the end of the year.
The announcement follows the dismantling of Knight Ridder, which until June was the second-largest newspaper company in the country after Gannett. Tribune, like Knight Ridder and other media companies, has been under pressure from anxious shareholders who have watched stock prices fall as readers and advertisers have migrated to the Internet.
The company said after its five-hour board meeting that it was restructuring two partnerships with the Chandlers, who began agitating earlier this year for the company to sell off its broadcast properties or consider breaking up.
“The restructuring of these partnerships frees the company to move quickly to pursue strategic alternatives to further enhance shareholder value,” Dennis FitzSimons, the chief executive, said in a statement. “Under these terms, all shareholders benefit.”
In a telephone interview later, he said the board’s actions “eliminated impediments to any transactions we might want to do, and management will explore strategic alternatives.’’
Describing the meeting as “very positive,” he declined to discuss the current situation at The Los Angeles Times, where the editor and publisher publicly refused last week to make cuts that Tribune had requested. The Times is Tribune’s biggest media property.
The media business has been in turmoil as readers, viewers and advertisers have shifted their habits and turned to the Internet. Newspapers in particular are facing a slump in circulation and little growth in advertising revenues while at the same time facing rising costs.
Mr. FitzSimons said the company had agreed to revise two complicated financial relationships with the Chandler family, whose stake in the company will rise from about 15 percent to nearly 20 percent.
The partnerships include millions of shares of Tribune’s preferred stock and common stock as well as real estate used by The Los Angeles Times, Newsday, The Baltimore Sun and The Hartford Courant, and various other investments. The partnerships have made it difficult for the company to make major sales because of tax repercussions.
The partnerships are not being dissolved. The Chandler family will have a 95 percent interest in them and Tribune will retain 5 percent. The Chandler family said in a statement that they were pleased with the arrangement. “We will now work collaboratively with management and the board to build value for all shareholders,” Warren Williamson, chairman of the Chandler Trusts, said in the statement.
Tribune shares, like those of other public media companies, have weakened significantly over the last few years, falling 36 percent since 2003, when Mr. FitzSimons took over. But the stock has risen recently as speculation has increased that it might sell some assets, and it shot up 4.4 percent yesterday.
It is not clear that there would be a single buyer for the entire company. When Knight Ridder put itself up for sale last year, it drew only one firm bid, from McClatchy, which bought the chain and its 32 daily newspapers. McClatchy promptly sold 12 of those papers at a premium, demonstrating that the properties were worth more separately than they were as a whole.
The risks for any buyer of Tribune would include the $2.4 billion in additional debt the company took on this year to repurchase some of its stock as well as broader concerns facing all print and broadcast companies as they cope with a slump in advertising and readjust to the Internet.
In a recent analysis of Tribune’s options, Goldman Sachs said it saw “few, if any” buyers for the company in its current form. That only one buyer stepped up for Knight Ridder, the Goldman analysis said, “suggests that there is a very limited pool of strategic buyers with interest in large-scale acquisitions of geographically diversified media portfolios.”
Three billionaires in Los Angeles have already expressed interest in buying The Los Angeles Times — and it seems likely, given the Knight Ridder experience, that other local buyers for individual properties could emerge in Tribune markets across the country.
Tribune Co. May Put Company, Parts Up for Sale
By Leon Lazaroff
Sept. 22 (Bloomberg) -- Tribune Co., publisher of the Los Angeles Times and the Chicago Tribune, agreed to consider a sale of the company or some of its assets after the shares slumped, according to a person familiar with the discussions.
At a meeting yesterday, Tribune's board named a special committee of independent directors to review the Chicago-based company's options. The study, to conclude by year-end, may lead to a sale of the entire company or some assets, the person said. Tribune may also accept a leveraged buyout.
The decision moves Tribune a step toward accommodating its largest shareholder, the Chandler family, which called for a breakup of the company in June after a 19 percent decline in the stock in five years. Yesterday, the company agreed to unwind two partnerships with the trusts, making it easier to sell assets as well as increasing the biggest shareholder's stake in Tribune.
``This opens the path for more things to happen,'' said Barry Lucas, senior vice president of research at Gabelli & Co. in Rye, New York. ``Now we have a date, which means we're coming to the beginning of the end of whatever may happen to Tribune.''
Shares of Tribune, the second-largest U.S. newspaper publisher, rose $1.31, or 4.1 percent, to $33.36 at 9:45 a.m. in New York Stock Exchange composite trading. The stock rose 4.4 percent yesterday in anticipation of an announcement. They have dropped 29 percent since the beginning of 2003, when Chairman and Chief Executive Officer Dennis FitzSimons first took over as CEO.
Tribune spokesman Gary Weitman declined to comment. Chandler representatives were on a plane and unavailable to comment, outside spokesman Daniel Katcher said last night.
Pressure
The loss of advertisers and readers to the Internet and cable television has cut profit and sales growth at the country's largest publishers, prompting shareholders to push for change. Knight-Ridder Inc. sold itself to McClatchy Co. in June for $4.1 billion to mollify investors unhappy with a decline in the company's stock.
The New York Times Co. came under attack from shareholder Morgan Stanley Investment Management Ltd. in April for its reliance on two classes of stock, which gives common stockholders little say. Chairman Arthur Sulzberger and Vice Chairman Michael Golden agreed this month to take pay cuts and Dow Jones Cos. is cutting the size of the Wall Street Journal to save money.
Tribune also owns 25 television stations and the Chicago Cubs baseball team. Tribune would be worth $40 to $45 a share as a privately held company, according to Michael Kupinski, an analyst with A.G. Edwards Inc. in St. Louis.
Letter
The battle between the Chandlers and Tribune has been waged in public letters and filings and exacerbated by rifts between Tribune management and the publisher of one of its biggest assets, the Los Angeles Times.
In June, the Chandler family in a letter to the board opposed a $2 billion share buyback and demanded a spinoff of Tribune's television stations as well as a possible sale of the company. In the letter, they said the stock's decline was evidence of ``the gravity of management's failure to address fundamental strategic issues.''
California investors Eli Broad, Ronald Burkle and David Geffen have each publicly expressed interest in buying the Los Angeles Times, Tribune's largest newspaper.
The paper's editor, Dean Baquet, and its publisher, Jeffrey Johnson, revolted against pressure to fire newsroom staff, distributing memos to staff voicing opposition to any cuts. Talks of newsroom reductions prompted more than 400 reporters, editors and office workers at the newspaper to petition Tribune not to make more cuts.
Partnerships
Tribune inherited the Chandler partnerships with its 2000 purchase of Times Mirror Co. for $7.5 billion. The partnerships, set up in 1997 and 1999, helped the Chandler trusts avoid paying taxes, as long as they weren't altered for seven years. That period expires next month.
Unwinding the partnerships makes it easier for the company to pursue tax-free transactions such as spinoffs.
``The structures of the Trust were cumbersome and the Chandlers were being irritants,'' said Lucas, who doesn't own Tribune stock.
Under the partnership restructuring, Tribune will receive all preferred stock they contain and 39.5 million of their 51.3 million common shares. The company retains a 5 percent ownership interest in the partnerships and gets the right to buy the real estate, including land used by the Los Angeles Times and Newsday, for $175 million in January 2008.
The Chandler family trusts will retain 95 percent ownership of the partnerships and the other 11.8 million Tribune common shares. The trusts' 15 percent holding in the company will increase by about 32 percent, to 48.7 million shares.
Board Committee
William A. Osborn, Tribune's lead independent director, will oversee the committee examining the company's options. Osborn is chairman and chief executive officer of Chicago-based Northern Trust Corp.
Before today, FitzSimons, 56, had identified about $420 million of $500 million in assets he plans to sell, including the sale of WLVI-TV in Boston last week for $113.7 million.
FitzSimons probably won't be able to satisfy the Chandlers until he sells one of the company's big-city newspapers, said Porter Bibb, managing partner of the venture firm Mediatech Capital Partners LLC in New York, before the announcement.
``Any positive moves by the company are going to mollify the Street,'' Bibb said. ``The question is whether that will mollify the Chandlers.''
