Apr 2, 2007 10:37 am US/Central
Zell Buys Tribune Company For $8.2 Billion
Tribune Plans To Sell Cubs After This Season
The Associated Press contributed to this report.
CHICAGO (CBS) ―
The Tribune Company announced Monday morning that it has been bought out by real estate investor Sam Zell in a deal valued at $8.2 billion.
The Tribune board of directors and Zell reportedly negotiated late into the evening Sunday night. At one point, reports said, the board gave Zell 12 hours to sweeten his bid as an ultimatum.
Zell has proposed using an employee stock ownership plan as a way to lower the taxes of any sale, but has said he had no plans to break up the company.
But the company today announced that it plans to sell the Cubs following the 2007 baseball season. That sale is subject to the approval of Major League Baseball and is expected to be completed in the fourth quarter of 2007.
Tribune said Zell plans to invest $315 million in the deal. He will eventually become chairman of the Chicago-based company's board when the deal is complete sometime in the fourth quarter.
"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 deal already has the support of two of Tribune's largest shareholders, including the Chandler family, which has about a 20 percent stake in the media company.
Charles Bobrinskoy, vice chairman of Ariel Capital Management, said his money management firm also would support the Zell deal. Ariel Capital owns about 6.1 percent of Tribune shares.
"These are clearly challenging times for all newspaper companies, but we're very pleased by today's announcement and plan to support the proposed transaction," Bobrinskoy said.
Tribune said Zell will use an employee stock ownership plan to finance part of the deal and lower the taxes on any sale. The ESOP, which resembles a profit-sharing plan, will become the majority owner of Tribune once the deal is complete. Zell will be entitled to buy 40 percent of the company's common stock.
"I am delighted to be associated with Tribune Company, which I believe is a world-class publishing and broadcasting enterprise," Zell said in a statement. "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."
An ESOP allows the company to borrow money and repay loans using pretax dollars. Payments of both interest and principle are tax-deductible and would create more leverage for a buyer.
"The ESOP can only help pay down this mountain of debt with a positive corporate culture that drives performance but does not deflate the motivation of workers," said Joseph Blasi, a professor at Rutgers University who is an expert on the structures.
Zell, 65, made his fortune reviving moribund real estate. After a bidding war culminated in February, he sold his company, Equity Office, to the private equity firm Blackstone Group for $23 billion.
If Tribune decides to accept another buyout offer before its shareholders approve the deal, the company will have to pay Zell a $25 million breakup fee.
Tribune shares climbed 87 cents, or 2.7 percent, to $32.98 in early morning trading Monday on the New York Stock Exchange.
(© MMVII, CBS Broadcasting Inc. All Rights Reserved.)
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