Tribune Suitor Zell Is Used to Bucking Trends

TRIBUNE SUITOR IS USED TO BUCKING TRENDS
[SOURCE: Wall Street Journal, AUTHOR: Sarah Ellison sarah.ellison@wsj.com and Dennis K. Berman]
Like other real-estate swashbucklers, Sam Zell is proud to be a contrarian. It's just as well. To complete his come-from-behind effort to buy Tribune Co., he'll have to be. As Tribune's special committee gathers today for a lengthy meeting that could decide the future of the company, the leading proposal is an aggressively leveraged offer from Mr. Zell, who proposes buying the company and transferring control to an employee stock ownership plan, an approach rife with tax benefits. Like a lot of other real-estate investors, he's comfortable buying distressed, unfashionable properties, often by taking on a substantial debt load and providing relatively little equity compared with other businesses. Then he spruces up the properties and waits for the market to cycle back. But the newspaper industry, pounded by Internet competition for readers and advertisers, has been riven by doubts about whether its problems are not cyclical but permanent. In this case, Mr. Zell is expected to put in less than $300 million of equity, a fraction of the company's total value of about $7.9 billion, not counting Tribune's existing $4.5 billion of debt. While details of his offer remain subject to negotiation, the structure would involve a few steps. In the first step, Mr. Zell would invest his equity and receive convertible preferred stock in Tribune. Then Tribune, using borrowed funds, would pay out about $17.50 a share to shareholders. In the next step, Tribune would create an employee share ownership plan. Tribune's ESOP could then roll future company contributions to employee 401(k) funds into the ESOP, effectively providing capital for the buyout without increasing Tribune's debt. (At the end of 2005, Tribune's retirement-savings plans included at least $2.3 billion, of which $610 million, or 26%, was already invested in company stock.) Mr. Zell's strategy for Tribune isn't known, although he has said he doesn't plan to break up the company, whose assets include a string of TV stations and the Chicago Cubs baseball team as well as the newspapers. What's clear, say real-estate experts, is that he isn't making a play for the real-estate assets held by Tribune, including the buildings that house the Tribune and Los Angeles Times newsrooms. The value of Tribune's properties -- estimated at less than $700 million -- simply isn't big enough to justify being the driver of the deal.
http://online.wsj.com/article/SB117521471477853968.html?mod=todays_us_ma...
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* Broad, Burkle Up Offer for Tribune Co.
http://www.washingtonpost.com/wp-dyn/content/article/2007/03/29/AR200703...
* L.A. duo reenters Tribune auction
http://www.latimes.com/business/printedition/la-fi-tribune30mar30,1,2348...

* Will Tribune extend deadline again?
[SOURCE: Associated Press]
As Saturday's self-imposed deadline looms for Tribune Co. to announce how it plans to increase shareholder value, speculation continued Thursday that the company might postpone announcing a possible sale, spinoff or reorganization.
http://chicagobusiness.com/cgi-bin/news.pl?id=24416