Few bids likely for Tribune Co.

Media giant's auction deadline is tomorrow

January 16, 2007|By James Rainey and Thomas S. Mulligan | James Rainey and Thomas S. Mulligan,Los Angeles Times

The Chandler family fired its first shot last summer, when the one-time owner of the Los Angeles Times lashed out at Tribune Co.'s plan to take on debt to buy back $2 billion in shares. The family blamed "disastrous" decision-making for the Chicago company's sinking stock price.

Those protests forced Tribune, which also owns The Sun, into play. But seven months later, the family that is Tribune's largest shareholder is still waiting for satisfaction. And observers say it's increasingly unlikely they will get it from an auction set to end tomorrow.

Tribune will probably attract few, if any, bids for the entire company, and any offers it does receive are expected to be close to the current share price, according to several people who have been observing or participating in the process.

Tribune's shares closed Friday at $30.60 -- barely above their level when the Chandlers launched their protests in June.

"You may not have an auction when all is said and done," said a professional associated with one private equity firm eyeing Tribune and who asked not to be identified because the auction is confidential.

Merrill Lynch analyst Lauren Rich Fine wrote in a report to clients Friday that Tribune shares were trading as if investors thought there would be no sale.

"We think there is a distinct possibility of that happening," Fine wrote, "and note that even if there is a sale, a big premium is unlikely."

That could prolong the uncertainty overshadowing the company that owns the Los Angeles Times and the Chicago Cubs baseball team as well as 10 other daily newspapers and more than 20 television stations.

Others following the Tribune saga said they expected at least a few bids for the media giant -- perhaps including one from the Chandlers themselves.

Despite several potential pitfalls, people following the deal said the most consistent interest has been expressed by a group composed of three private equity firms -- Madison Dearborn Partners LLC, of Chicago, Apollo Management LP, of New York, and Providence Equity Partners, of Rhode Island.

The consortium has long been viewed as a contender for Tribune because of Madison Dearborn's Chicago roots and its reported interest in hometown assets such as the Cubs and WGN-TV. Former Tribune chief executive John W. Madigan was a Madison Dearborn partner until he took a leave of absence in the fall and later resigned.

Another bid may come from Los Angeles billionaires Eli Broad and Ron Burkle, partners who have said one of their motivations would be to return the Los Angeles Times to local ownership.

Both of the magnates declined through their representatives to comment. "It's a tough deal to do, but they're thinking of it," said one person familiar with the pair's deliberations.

With no other parties showing obvious interest, that leaves the Chandlers.

The Chandler trusts are Tribune's largest shareholder. The family's stake was increased to 20 percent in September when two Chandler partnerships with Tribune were restructured.

Since then, representatives of the Chandler trusts and their 170 beneficiaries have been exploring the possibility of a bid by the family.

"They are not really looking to get back in this business," said one businessman who has spoken to the Chandlers' representatives. "But they will do it if there is no other alternative."

Chandler representatives met with Tribune's executives last week in Los Angeles to receive a presentation on the company's assets. The Chandlers have explored joining various partners -- including Broad and Burkle -- to make an offer.

Through a spokesman, the family declined to comment.

The cool reception that has greeted the auction of Tribune comes in stark contrast to what the Chandler interests expected. When the family's three directors on Tribune's board first lodged their protest, they quoted analysts who valued the company's stock as high as $46 a share.

Some experts predicted that marquee assets such as the Cubs, the Los Angeles Times and the Chicago Tribune would generate considerable excitement.

But the auction faced hurdles, especially because of the newspaper industry's continuing struggle to establish itself as a winner online.

If offers for the entire company fail, the company may entertain bids for individual assets.

Tribune has thus far declined to consider such proposals, including a $2 billion bid by entertainment mogul David Geffen for the Los Angeles Times. A Baltimore group led by former Baltimore County Executive Theodore G. Venetoulis has expressed interest in making a bid for The Sun.

Individual asset sales could pose a problem because many of the businesses have a low tax basis and their sale could trigger a large tax bill.

James Rainey and Thomas S. Mulligan write for the Los Angeles Times.

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