The Tribune Tower is pictured in Chicago, April 2. Tribune Co. said on Monday it agreed to Chicago real estate magnate Sam Zell's bid to take the newspaper publisher and broadcaster private, and it plans to sell the Chicago Cubs after the 2007 baseball season. - REUTERS (Reuters):
Tribune Company said on Monday it agreed a bid by Chicago real estate magnate Sam Zell to take the newspaper publisher and broadcaster private, and that it plans to sell the Chicago Cubs after the 2007 baseball season.
The deal, at US$34 a share, values Tribune at around US$8.2 billion and is structured as an employee stock ownership plan with Zell injecting US$315 million in two stages.
Tribune shares rose 2.55 per cent to $32.93 in early trading on the news.
Zell will become chairman, Tribune said.
The announcement comes six months after Tribune - publisher of the leading U.S. newspapers including the Los Angeles Times, Chicago Tribune, Newsday and The Baltimore Sun - started soliciting offers last fall.
Los Angeles billionaire philanthropist Eli Broad and his partner, billionaire grocery store investor Ron Burkle, had also bid for Tribune at US$34 a share.
"It turns out this is a little lower than I would have thought, but times are what they are. It's like selling your house. Last week it was worth 'x' - this week it's not," said Benchmark Company analyst Ed Atorino.
"What's happened in the last three or four months is that cash flow is down and the industry environment deteriorated."
Like most U.S. newspaper publishers, Tribune has seen advertising revenue andcirculation fall as more people use the Internet to get news and entertainment.
The company, which is also a major TV broadcaster, has been considering a buyout or the spinoff of various divisions after its largest shareholder, the Chandler Trusts, publicly aired their anger with the decline in its stock price last year.
Upon completion of the deal, Tribune will be privately held, with an Employee Stock Ownership Plan (ESOP) holding all outstanding common stock and Zell holding a subordinated note and a warrant entitling him to buy 40 per cent of common stock.
The two-stage transaction comprises first of a cash tender offer for about 126 million shares at US$34 apiece, funded by borrowings and a US$250 million investment from Zell to be completed in the second quarter of 2007.
The second stage will cover the remaining publicly held shares and an additional US$65 million investment by Zell, which Tribune expected to close in the fourth quarter.
Tribune said the Chandler Trusts have agreed to vote in favour of the deal and the board will recommend other shareholders approve it as well.
Until shareholder approval, the board can conside proposals, Tribune said, adding the break-up fee to Zell would be US$25 million.
