Hoping to relieve the market’s sour taste for its stock, Tribune Co. has decided to spend $2 billion buying back its own shares.
The buyback is immense for a company the size of the newspaper publisher and broadcaster, representing around 25% of all of the company’s outstanding shares.
“We believe Tribune's current stock price does not reflect the value of the company or the potential we have for creating shareholder value,” Tribune CEO Denis Fitzsimons told investors in a conference call Tuesday morning. “The credit markets are accommodating with interest rates at the lower end of their historical range, and we're optimistic about the prospects for improved performance in our media businesses.”
Tribune is moving for an instant effect in its stock price. While most companies spread their buyback programs over many months, Tribune will immediately tender for up to 53 million shares in the open market. The company will buy another 10 million shares from its largest shareholders, the McCormick Tribune Foundation and Cantigny Foundation. Finally, Tribune will buy another 12 million shares in the open market.
Tribune executives have watched the company’s stock get hammered by management missteps and investors distaste for its two core business sectors, newspapers and broadcasting (which accounts for 27% of annual revenues.)
The company plans to borrow money to finance the buyback, but will partly offset that by selling around $500 million in assets. Tribune would not specify what would go on the block, citing only non-core broadcasting and publishing assets, real estate and securities.
One possible asset is a 31% stake in Food Network that Morgan Stanley media analyst Doug Arthur estimates is worth $800 million.
Scripps controls and operates the cable network, but Fitzsimons doesn’t consider it to be a core asset. "We've seen such good growth in Food versus the discussions on price that we have had, we feel it's more valuable to keep the cash flow.,” Fitzsimmons says.
However, he added that “If we could get the right price that would make a positive event for shareholders, that is one that we would certainly divest.”