June 8: Zell to lose control of Tribune?: San Zell's adventure in the print newspaper business may be coming to
an end, as the Tribune Co. and its senior creditors are reportedly in
the early stages of working out a deal that would transfer control of
the bankrupt Chicago media conglomerate to its senior lenders. - George White
May 5: No papering over troubles at publishers With six newspaper publishers already in bankruptcy this
year, earnings reports from E.W. Scripps and A.H. Belo indicate that at least
two more could join them. -- David Elman
April 15: Sam Zell's mea culpa: The billionaire admits that acquiring Tribune was a blunder that certainly cost him a fortune. - Gerald Magpily
March 30: Tribune's Ch. 11 forces combined newsroom: One of the results of Tribune Co.'s December Chapter 11 bankruptcy filing and the sluggish economy is the announcement that the media conglomerate is consolidating the newsroom of a newspaper and two television stations in Connecticut. The move is part of a growing trend of media conglomerates combining their newsroom resources to save money. - Gerald Magpily
In other Pipeline headlines: March 11: Tribune wants DIP changes;
Feb. 24: Tribune pulls its Tribune Tower from the market given turmoil
in the real estate market; Feb. 20: Sidley Austin LLP to counsel
Meanwhile, Tribune filed for Chapter 11 Dec. 8, following reports the debt-ridden media conglomerate hired Lazard and Sidley Austin to advise as it weighed a possible bankruptcy filing.
The company is in the process of selling assets -- including the Cubs -- to pare debt incurred on Zell's $8.2 billion, or $14 billion with debt, take-private of the company. Back to that auction.
Citing a Reuters report in early December, White wrote:
"Consortia led by Tom Ricketts, the CEO
of Chicago investment bank Incapital; private equity dealmaker Marc
Utay of Clarion Capital Partners; and Chicago real estate executive
Hersh Klaff have all entered offers ... a group headed up by Jim Crane,
the former CEO of freight-forwarding company EGL, may also be in the
mix as well, the report said. Conspicuously missing from the bidding
process was Internet billionaire Mark Cuban, the flamboyant owner of
NBA basketball's Dallas Mavericks."
Cuban, meanwhile, is fighting insider trading charges.
Meanwhile, The Wall Street Journal said Nov. 7 that the company may end
up keeping a 50% stake in the team, as the credit crunch has stalled
the sale, Diakantonis wrote. And speculation abounded as to who was in and who was out of the bidding.
And it looked like Tribune could be in danger of missing a debt payment that helped fund Zell's buyout of the company last year. Analysts sounded the warning, The Deal's Christine Idzelis reported Oct. 29.
As the auction for the Cubs went on, Tribune's latest deal came Sept. 3, agreeing to sell down its stake in CareerBuilder LLC through a $135 million deal with Gannett Co. Tribune still holds 30.8%. Meanwhile, Zell has been trying to slash debt. The Chicago real estate magnate, had said he hopes to present an agreement to sell the Cubs to Major League Baseball by year's end. First-round bids came in July 18, and the auction was down to five bidders in late summer with some interested only in Wrigley Field, Nolter noted Aug. 26.
Cuban, whose name often comes up when a sports franchise goes on the block, was seen as the early favorite, Diakantonis wrote July 30. The other bidders included the Utay-led group, the Ricketts team, Andrew Murstein's Sports Properties Acquisition Corp., a special purpose acquisition company that raised $215 million in a January IPO; and
either MVC Capital Inc. chairman Michael Tokarz or Klaff. The auction entered another phase in September after a
month of due diligence, a source told Diakantonis. Murstein's group's bid was reportedly rejected but invited to partner with another bidder, while Ricketts was still in the running, Diakantonis noted Sept. 2.
Reuters noted previously the list of bidders has been narrowed to three to five players who offered at least $1 billion for the team, their home base Wrigley Field and Tribune's interest in Comcast SportsNet.
Among those that were rejected after the first round is John Canning Jr., a Milwaukee Brewers part owner and chairman of Chicago buyout firm Madison Dearborn Partners LLC. He had been thought of as a front-runner, the Chicago Tribune noted. Also rejected was Don Levin, who owns minor league hockey franchise the Chicago Wolves, Reuters said. Both bids were under $1 billion.
Meanwhile, Zell's first deal since taking Tribune
private in December came May 12 -- the sale of
Long Island, N.Y., paper Newsday to Cablevision Systems Corp. for $650 million. Terms of the partnership call for Tribune to hang on to a 3% stake in the target. Meanwhile, the offering memorandum on the Cubs went out the second week of June.
The Newsday sale came weeks after Tribune was said to be near a deal with media mogul Rupert Murdoch, at the helm of News Corp. and the New York Post, for $580 million, according to reports April 22.
Murdoch dropped his bid May 10. Mort Zuckerman, who owns the New York Daily News, also put forth a $580 million offer for Newsday, while the New York Observer's Jared Kushner was rumored to be involved in a Cablevision bid, though such buzz later faded.
Zell has been looking for ways to pare down debt since the $8.2 billion take-private's close. The sale of the Cubs, and possibly Wrigley Field, will also help bolster its liquidity position.
A BANNER YEAR
But back to the buyout. As was expected before year's end, Sam Zell closed his $8.2 billion buyout of Tribune Co. on Dec. 20, and as Nolter pointed out, he quickly got to work shuffling management. He takes over as chairman and CEO from Denis FitzSimons and tapped radio and television entrepreneur Randy Michaels to head up the media conglomerate's interactive and broadband unit.
(For more on the auction's play by play, see below.)
Tribune said Dec. 12 it foresees completing the sale of the team, the Wrigley Field stadium and related assets in the first half of 2008 (which didn't happen). The news came nearly two weeks after Zell, a Chicago real estate magnate, won approval from the Federal Communications Commission for his buyout of the media conglomerate. The team went on the block in April when the buyout was announced, and proceeds will be used to pay down debt.
New York Times' DealBook pointed out in mid-September that things could get messy for the auction, citing a Chicago Tribune article, given that for the seller, the bottom line is reportedly price and for Major League Baseball, the best fit.
As far as bidders go, an earlier Tribune piece Aug. 2 said Madison Dearborn's Canning, an 11% owner of the Milwaukee Brewers, was busy putting together a group of several Chicago business elites for a bid. (The paper later singled him out as the front-runner.) Among the players, Tribune said at the time were McDonald's Corp. chairman Andrew McKenna, restaurateurs Larry Levy and Richard Melman, CDW Corp. founder Michael Krasny and Chicago PE firm GTCR Golder Rauner's David Donnini. Others reports have indicated as interested in the sluggers include: Cuban; real estate developer and former Illinois State Senator William Marovitz; Tom Begel, the founder of Chicago private equity firm TMB Industries; and Don Levin, the owner of minor league hockey team the Chicago Wolves.
Zell won the bidding in April, which won shareholder approval in August, and in November, the FCC's OK. Days later, the company went to court to appeal the commission's rejection of its request for indefinite waivers of cross-ownership rules -- which prevent companies from owning both a broadcaster and newspaper in the same market. The waivers it was granted affect four markets and, the company argued, should have been permanent. The suit, however, is also a legal maneuver to do away with the cross-ownership ban altogether, The Deal's Ron Orol wrote.Suit aside, the deal still looked on track to close by year's end, as investors were promised. Orol noted Nov. 30:
Closing the buyout by year's end is critical for Tribune because establishing the deal's 2008 tax status is a crucial element of the financing. Also, the $34 a share offer will begin increasing at an 8% annualized rate after Jan. 1.
The company also said Dec. 6 it would use $500 million of its available cash to trim borrowings in connection with the buyout.
The deal looked nearer to closing Oct. 24 after Tribune passed another hurdle: The company unveiled its third-quarter results, which, as a source told Nolter, gave the impression the company would likely meet its "covenant threshold," one of the last barriers to getting the deal done. (A solvency option is the third, Nolter noted.)
The deal won shareholder approval Aug. 20 but looked as if it could still face hurdles given the state of credit markets. More broadly, it serves, Nolter wrote, as a bellwether for the entire newspaper industry.
Favor reportedly fell to Zell's $8 billion buyout proposal in late March, and then California billionaires Ron Burkle and Eli Broad were said to have matched his offer, ahead of the quarter's end deadline. Zell's offer, which has at its core an employee stock option plan, reportedly gave Tribune's sellers pause because of the risk involved in employees converting their retirement interests to Tribune stock, which had fallen from more than $50 a share in early 2004 to $31.10 a share March 27. In March, Zell altered the mix of debt and equity and boosted his offer, a move to put to concerns to rest, Bloomberg reported. The agreed-to offer carried a $25 million breakup fee, which left room and opportunity for another bid to trump Zell's.
Meanwhile, Burkle and Broad complained in a letter to the company's board March 24 that they weren't given a fair shot, the Journal said. Then, on March 29, the bidders sent a letter to Tribune's board offering an ESOP plan valued at $34 a share, including $500 million cash in exchange for a 40% stake, the Journal said.
Concurrently with its auction, the media company was weighing a so-called self-help restructuring strategy, the WSJ said March 16, which includes taking on debt, paying a dividend to shareholders and spinning off the Chicago Cubs and Tribune's television stations. But given the state of the newspaper industry and continued declines in print advertising revenue, the Journal said, Tribune could have moved to scale it back, take on less debt and pay a smaller dividend to shareholders, whose unrest sparked the auction in the first place.
Shortly after wrapping up the sale of his Equity Office Properties Trust in a $39 billion leveraged buyout, Zell confirmed March 1 that he had made a go for Tribune, Crain's Chicago Business reported. He said his interests were "100% economic," and had nothing to do with owning the Chicago Cubs or Tribune's dailies the Los Angeles Times or the Chicago Tribune.
The news came a day after Warren Buffett penned his annual letter to shareholders of Berkshire Hathaway Inc., which counts the Buffalo News as a subsidiary, and offered a warning for newspaper investors across the board, cautioning noneconomic individual bidders in search of prestige or trying to bring local ownership to papers for civic-minded reasons to beware of high fixed costs and the diminishing importance of newspapers. He wrote:
We hope that some combination of print and online will ward off economic doomsday for newspapers, and we will work hard in Buffalo to develop a sustainable business model. I think we will be successful. But the days of lush profits from our newspaper are over.
The Chandler family, which became Tribune's largest shareholder when the company acquired the Chandler-led Times Mirror Co. in 2000 for $8.3 billion, also put forth an offer and said it would hold onto the 11 newspapers and spin off the 23 broadcast stations as their own entity. In December 2006, The New York Times said the Chandler family had engaged private equity firms about teaming up on a bid for part of the company -- to reclaim ownership or possibly instigate a bidding war. The Chandler family aired its grievances against the company in June 2006, but at the time, the NY Times report said, wasn't interested in taking over the company.
Final bids in the auction, which officially kicked off in September 2006, came due Jan. 17, and according to reports along the way at many times, it didn't seem to be going too well. Zell was a late-game entrant.
Just ahead of the deadline Jan. 16, a New York Post report indicated that prospective private equity bidders that had reviewed the company, including Providence Equity Partners, Madison Dearborn Partners and Apollo Management, weren't planning to submit final proposals, unable to contemplate a viable, near-term exit strategy.
On Jan. 4, the McCormick Tribune Foundation, which controlled 11.7% of Tribune shares, along with the Cantigny Foundation, which held 1.3%, said that it had hired Blackstone Group LP to weigh their alternatives as they related to their investment. The team was the second shareholder group to come forward during the auction, which suggested a growing belief that the company's vast media assets were likely more valuable if sold off in parts, as one source told The Deal.
Early bids from private equity suitors came in the last week of October 2006 and according to reports were "disappointingly low." So, the company sought to gauge market interest in some of its assets individually. According to Reuters, a group of Baltimore investors were eying The Baltimore Sun, while Connecticut's Chase family expressed interest in the Hartford Courant, the paper said Nov. 8, 2006. Other private equity suitors were thought to include a Thomas H. Lee Partners and Texas Pacific Group duo, and possibly Carlyle Group and Bain Capital, Reuters said.
Two developments early in 2006 at the L.A. Times suggest Tribune was exercising even greater control over the paper, firing editor Dean Baquet and replacing him with Chicago Tribune managing editor James E. O'Shea, weeks after Banquet publicly resisted job cuts in his newsroom alongside publisher Jeffrey Johnson, who was removed in October, and replaced with former Chicago Tribune publisher, David Hiller. The regime change raised questions about layoffs, but in an interview with the Times, the company's publishing president Scott C. Smith said he "hoped the management change would help put an end to speculation that the company intended to sell The Times," the paper said Oct. 6, 2006.
The news came just weeks after Tribune announced a committee to explore its options. It was just three months after the Chandler family detailed its issues with management and the direction of the company in a June 2006 regulatory filing.
The stakeholder took issue with:
The company promptly responded to the June 14, 2006, filing, quoting FitzSimons on plans for an "aggressive performance improvement plan." He said: "This includes continued expansion of our Internet portfolio, the sale of noncore assets and additional cost saving initiatives."
Meanwhile, some directors rallied behind FitzSimons, according to The New York Times, labeling the call for a breakup as nothing more than a power play.
In the end, Tribune's fate was out of its hands. The company has been slow to rally on its Internet push and saw the devastation peer McClatchy Co. delivered its newest asset, Knight Ridder Inc. After agreeing to take beleaguered Knight Ridder for $6.5 billion in March 2006, McClatchy carved it up, put 12 of the target's papers on the block and proceeded to sell them off.
|Dealwatch executive summary|
|08.24.09||Ricketts reach finalized agreement for Cubs but still two more approvals needed.|
|06.19.09||Utay, Hindrey back in talks with Cubs.|
|02.18.09||TD Ameritrade Stock sale will partly pay for Cubs.|
|01.23.09||Tom Ricketts emerges as frontrunner in Cubs auction.|
| Tribune files Ch. 11.
Will Tribune miss a debt payment? Has the Cubs auction hit a snag?
Tribune sells down CareerBuilder stake.
Cubs auction moves along.
Tribune benches one offer, narrows bid field for Cubs.
Cubs first-round bids come in.
Cubs books go out this week.
Cablevision wins Newsday.
Are Zell, Murdoch near a deal for Newsday?
Tribune buyout closes; Zell gets to work.
|12.12.07||Tribune foresees Cubs sale in first half of 2008.|
|12.06.07||Tribune appeals FCC order.|
|12.06.07||Tribune to use cash to cut borrowings.|
|11.30.07||FCC approves Tribune buyout.|
|10.24.07||Tribune reports third-quarter results; deal looks like it's still on course.|
|8.31.07||Tribune as a measure for the entire industry.|
|8.20.07||Tribune shareholders OK sale, but still face market hurdle.|
|4.02.07||Zell wins Tribune auction. Cubs to be sold after the baseball season.|
|3.29.07||Broad and Burkle raise their offer. (WSJ article; subscription required.)|
|3.28.07||Zell is in the lead, Bloomberg says.|
|3.24.07||Burkle and Broad want a chance to boost their offer. (WSJ article; subscription required.)|
|3.16.07||Tribune rethinks things. (WSJ article; subscription required.)|
|3.06.07||Tribune sells two Connecticut papers to Gannett for $73 million.|
|3.1.07||Zell confirms his interest in Tribune.|
|3.1.07||Buffett pens letter to shareholders, issues newspaper acquirers a stern warning.|
|2.26.07||Sam Zell eyes Tribune.|
|1.18.07||Chandlers, Burkle and Broad, and some private equity bidders all want a piece of the Tribune pie.|
|1.17.07||Bids for Tribune come due.|
|1.04.07||Two more Tribune shareholders weigh their alternatives.|
|12.21.06||Tribune pitches itself.|
|12.13.06||The Chandler family holds talks with prospective private equity partners.|
|11.08.06||A group of investors makes a play for the L.A. Times as its editor, in opposition to newsroom cuts, is ousted.|
|11.02.06||Tough times hit Tribune auction.|
|10.27.06||Local bidders pursue hometown assets.|
|10.05.06||LA Times' publisher is ousted.|
|9.21.06||Tribune looks to a special committee for advice on its future.|
|6.16.06||Independent directors call Chandler outcry a power play.|
|6.14.06||Tribune fires back.|
|6.14.06||Trusts representing the Chandler family send 11-page letter to the Tribune board outlining their concerns about the media group.|
|6.11.06||Rudy Giuliani may move to acquire the Cubs.|
|6.05.06||Tribune says it will sell its Atlanta television station to Gannett for $180 million.|
|5.25.06||Bertelsmann pays a premium to avoid an IPO.|
|5.20.06||Assets Tribune may unhand include the Food Network.|
|5.01.06||Dealwatchers ponder the future of old and new media.|
|3.20.06||McClatchy puts 12 Knight Ridder papers on the block.|
Source: The Deal, press reports