Apr 2, 2007 11:11 am US/Central
Real Estate Mogul Buys Tribune Co. In $8.2B Deal
Billionaire Sam Zell Wins Bidding War For Chicago-Based Media Firm
CHICAGO (CBS) ―
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The Tribune Co. owns several TV stations and newspapers, including the Chicago Tribune. (File)
CBS
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Real estate mogul Sam Zell offered a buyout of $8.2 billion. (File)
AP
Tribune Co. has accepted a buyout offer from real estate investor Sam Zell in a deal valued at about $8.2 billion, the media company said Monday.
Tribune said Zell plans to invest $315 million in the deal and the company will sell the Chicago Cubs baseball team at the end of this season, reports CBS station WBBM-TV in Chicago.
He will eventually become chairman of the Chicago-based company's board when the deal is complete.
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 sweeten his bid as an ultimatum.
Tribune said the buyout will be conducted as a two-part deal. The first stage, expected to be completed in the second quarter, will involve a cash tender offer of $34 per share for 126 million shares, more than half of the outstanding Tribune shares. The remaining shares will be purchased later at the same $34 per share price.
Tribune has about 240 million shares outstanding, according to a regulatory filing.
Real estate mogul Zell had offered a buyout deal worth $8.2 billion. Los Angeles billionaires Eli Broad and Ron Burkle had also been bidding for the paper, but on Sunday, reports said they had all but conceded a Zell victory.
Broad and Burkle made an 11th-hour bid for the company last Thursday, offering $34 per share, or $8.2 billion, according to a person familiar with the offer who was not authorized to disclose details and asked to remain anonymous.
The Burkle-Broad bid included $500 million in cash and would use an employee stock ownership plan to raise money for a buyout. It is believed that Zell was proposing to invest $300 million and would use a stock ownership plan.
An ESOP resembles a profit-sharing plan, but allows the company to borrow money and repay loans using pretax dollars. Payments of both interest and principal are tax-deductible and would create more leverage for a buyer.
Tribune also is said to be considering a "self-help" plan that would involve spinning off the company's broadcast division and borrowing money to pay a one-time cash dividend to shareholders.
Like most newspaper companies, Tribune has been struggling with declining profits, circulation and advertising revenues. Last month, the company announced revenue fell 3.4 percent in February as its publishing division continued to struggle.
In addition to the Chicago Tribune, the company owns nine other daily newspapers, including The Los Angeles Times, as well as 23 TV stations and the Chicago Cubs baseball team.
Tribune's share price fell about 50 percent from early 2004 until last spring and has languished at just above $30 for months, down from an all-time high of $60.88 in November 1999.
Its shares climbed nearly two percent Friday on the New York Stock Exchange as investors awaited an announcement from the company.
Zell, 65, has earned a reputation as an astute investor, making 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.
He's 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.
(© 2007 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)
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