Tribune seeks offers on each property

Company as whole draws low bids

November 02, 2006|By James Rainey | James Rainey,Los Angeles Times

A batch of low bids for Tribune Co. has prompted the Chicago media company to open itself to offers for its individual business units, which include the Los Angeles Times, KTLA Channel 5 and the Chicago Cubs.

A deadline Friday for non-binding preliminary offers resulted in a handful of bids at about the company's current share price, two sources familiar with the process said.

That led Tribune's investment bankers to begin phoning individuals who previously expressed interest in the company's 11 daily newspapers and other holdings, to say the company would now entertain bids on those properties.

In Los Angeles, entertainment mogul David Geffen, former homebuilder Eli Broad and former supermarket magnate Ron Burkle have all said they were interested in buying the Times.

Local groups or individuals have said they would like to acquire other Tribune papers, including The Sun, The Hartford Courant and Newsday, which is based on Long Island.

Under pressure from shareholders because of its sagging share price, Tribune announced in late September that it would entertain offers for the possible sale or breakup of the company. A special committee of Tribune directors initially put off potential buyers of individual assets, saying it only would accept offers for Tribune as a whole.

But no media companies came forward in the initial bidding. Several private equity firms - including Bain Capital, the Carlyle Group and a partnership of Texas Pacific Group and Thomas H. Lee Partners - made nonbinding bids. But the offers all hovered near the recent stock price, the sources said.

News of the tepid bidding sent Tribune stock down late yesterday, with shares falling 71 cents to $32.62, then continuing to slide in after-hours activity to $32.

"No one is going to be happy with this news. It's not good for Tribune. It's not good for the shareholders," said a businessman interested in buying one of the Tribune papers. The businessman asked not to be named, fearing he would alienate the directors, who will decide the company's fate.

Tribune faces the same challenges confronting many media companies. The circulation of its newspapers continues to fall. Many advertisers have shifted to the Internet.

Newspaper Web sites have recorded strong growth and may reach more readers than their publications' print editions. But online advertisements sell for considerably less and still provide only about 5 percent of newspaper companies' total revenue.

In the most recent example of the problem, the Los Angeles Times on Monday reported its weekday circulation was down 8 percent and its Sunday circulation fell 6 percent. Executives at the paper said most of the decline came from eliminating free and low-cost deliveries to hotels and schools.

An executive with one of the private equity firms that made a modest offer for Tribune said that investors worry about whether the newspaper industry's woes are reversible. They also believe that the company has already been tightly managed, making it difficult to find additional cost savings that investment firms usually rely on to wring higher profits from their acquisitions.

The request for bids on individual Tribune businesses does not mean that offers for the whole company will be rejected, the sources said. The company simply felt obligated to assess its value by seeing how the market valued each of the properties.

Analysts studying Tribune previously have said that its 11 daily newspapers, 25 television stations and other holdings -which include television's Food Network and the online job site CareerBuilder - could be worth as much as $46 a share.

Substantial offers on the individual businesses may prompt the equity firms to raise their bids for the entire company.

James Rainey writes for the Los Angeles Times.

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