Investors raise their stakes in Tribune

Sale or a breakup thought inevitable

November 15, 2006|By Tom Petruno | Tom Petruno,Los Angeles Times

Several investment companies that are among Tribune Co.'s largest shareholders bought more of the stock in the third quarter, betting on a higher share price for the embattled media giant, financial reports show.

Two major investors who raised their stakes in Tribune, which owns the Los Angeles Times, The Sun and the Chicago Tribune among its media holdings, said a sale or breakup now appears inevitable.

"I don't think you can put the rabbit back in the hat," said John W. Rogers Jr., chairman of Ariel Capital Management, which owns about 6.6 percent of the company's shares.

Tribune's board put the firm up for auction in late September under pressure from disgruntled shareholders. Rogers said the board was doing the right thing; selling the company as a whole or in pieces would unlock the value in the company's assets.

"We just think there is a lot of value there," Rogers said of Tribune shares, repeating a theme he has stressed all year. But he declined to say what he thought the stock was worth.

On Wall Street, many traders remain skeptical of how much Tribune shares might fetch in a buyout. The stock reached $33.99 on Sept. 22, a 52-week high, but has since pulled back.

People familiar with the bidding say potential buyers aren't willing to pay much more than what the stock has been trading for recently. The shares slipped 40 cents to $32.06 yesterday and are up 6 percent year to date.

Ariel, based in Tribune's hometown of Chicago, raised its stake to 15.7 million shares as of Sept. 30, from 14.9 million on June 30, a 5.2 percent increase, according to the investment firm's latest filings with the Securities and Exchange Commission.

Investment companies are required to publicly disclose their stock holdings at the end of each quarter. Third-quarter filings were due to the SEC yesterday, although not all shareholders may have met that deadline.

Another big buyer in the quarter was Gamco Investors Inc., a Rye, N.Y.-based investment firm headed by Mario Gabelli, who has long been a high-profile player in media stocks. Gamco's stake in Tribune jumped to 3.3 million shares, or 1.4 percent, as of Sept. 30, from 1.1 million at midyear.

Barry Lucas, who advises Gabelli's institutional investing arm, said he believes Tribune is worth at least $39 a share. The company, he said, has "some pretty enduring franchises" in the Times, Newsday, Chicago Tribune and other properties, including the Chicago Cubs.

He also said he expects Tribune to be sold or broken up.

"I think it's a lot less likely that it remains intact" as a public company, Lucas said. He noted pressure from the Chandler family of Los Angeles, which owns about 20 percent of the stock and launched a revolt against management in June, contending that Tribune was pursuing a "failed strategy."

Mutual fund company T. Rowe Price Associates also raised its stake in Tribune in the third quarter, according to the company's latest SEC filing. The firm controlled nearly 17 million shares, or 7.1 percent, as of Sept. 30, up from 15.6 million at midyear.

A T. Rowe Price spokesman in Baltimore said he couldn't comment on the holdings. A large block of the stock is held in the T. Rowe Price Equity Income fund, which targets companies believed to be undervalued.

Optimism about a significant payoff from Tribune stock isn't shared by Lord, Abbett & Co., a Jersey City, N.J., investment manager that slashed its stake in Tribune from 8 million shares at midyear to 3.6 million as of Sept. 30.

"We felt we had more exposure than we wanted" as long-term investors, said Robert Morris, director of equity investments at Lord, Abbett.

The relatively low bids Tribune has received from potential buyers has divided the Chandler family, the Times reported yesterday. Some in the clan had raised the issue of whether the family should launch its own offer for Tribune, according to the report.

People familiar with the auction process said Tribune has received four preliminary bids from private-equity investors, as well as one from media titan Gannett Co. and another from Los Angeles billionaires Eli Broad and Ronald W. Burkle.

None of the offers is binding. Tribune's board has said it expects to make a decision on the company's future by year's end.

Tom Petruno writes for the Los Angeles Times.

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