Wednesday, January 17, 2007

Broad And Burkle To Buy 30% of Tribune Company?

Just when you thought the soap opera couldn't get any more complicated - Eli Broad, Ron Burkle, the Tribune - and the Chandlers - soon may all be in bed together!

Broad and Burkle prepare to bid for stake in Tribune
By James Rainey
Times Staff Writer

6:12 PM PST, January 17, 2007

Southern California billionaires Eli Broad and Ron Burkle have arranged an offer to buy a large minority stake in Tribune Co. of Chicago -- a proposal that would allow payment of a substantial dividend to shareholders and give the duo substantial say over assets that include the Los Angeles Times, a source close to the two men said.

It was unclear Wednesday afternoon whether the two men would go ahead with their offer, but they had drawn a detailed plan that would put $500 million of their own money into the company, in addition to a substantial debt package that would allow payment of the dividend, the source said.

In exchange, Broad and Burkle would get an interest in Tribune that would eventually increase to about 30% and several seats on the company's board of directors. The duo would also receive warrants that would allow them to take on an even larger stake in the company over time.

The proposal was the only offer received by Tribune before a deadline Wednesday of 5 p.m. Central Time for bidding on the company, according to several sources following the auction for the company, which also owns KTLA Channel 5, the Chicago Cubs, 22 other television stations and 10 other daily newspapers.

Broad and Burkle have long expressed interest in owning the Los Angeles Times, saying that they wanted to put the paper back in local hands more than six years after California's Chandler family sold the paper and the rest of Times Mirror Co. to the Chicago media company.

Details of the proposal were not available and Tribune declined to comment. It was unclear how the Chandler family would respond to the proposal. The family pushed Tribune into play in June when it protested against Tribune management and said the company should review alternatives to increase the company's sagging stock price.

Several private equity firms earlier had made it clear they were bowing out of the four-month-old Tribune auction. They cited the difficult atmosphere for media companies and newspapers in particular, which are losing readers and advertisers to the Internet.

Chicago-based Madison Dearborn Parnters had been expected to lead one bid for Tribune. But sources close to the firm said that the Madison consortium decided not to bid after examining Tribune's books. The investment firm found declining revenues and large tax liabilities. The taxes would substantially cut into any proceeds that Tribune would realize from a sale.

The Cubs exemplified the tax dilemma confronting Tribune. The company listed the baseball team's value at $800 million to $1 billion. But even if it could get such a price, it would have to pay capital gains based taxes on the club's increased value. It paid just $20.5 million for the Cubs in 1981.

The flagging revenues at Tribune's papers left one Madison Dearborn adviser to conclude "it's just a crappy industry. I hate to tell you that. But you know."

Madison Dearborn totaled up its estimate of the value of Tribune's 11 daily newspapers, 23 television stations and other holdings. Its total came to less than the company's current market value -- $7.25 billion as of Tuesday. But Tribune's auction representatives had made clear that the company would not accept an offer below the company's market value.

"Everybody there was hoping they could make sense of this and when you added up the value of each of the properties that you would get to a price above market," said one person familiar with Madison Dearborn's thinking. "But when they added up all these prices, they just couldn't get above market price."

And the Chicago company took a rosier view than its two partners -- New York-based Apollo and Rhode Island-based Providence. Both those firms were even less inclined to go forward with an offer.

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