Media conglomerate Tribune Company has ended months of speculation over its future by deciding to take the company private with $315 million in financing from real estate baron Sam Zell. As part of the deal, which is intended to keep Tribune's newspaper and broadcast station holdings intact, Tribune shareholders will receive $34 per share, a 5.9% premium over Friday's closing price of $32.11.
Under the deal, Zell will join the Tribune board after his initial investment and then will become chairman when the transaction closes. An Employee Stock Ownership Plan (ESOP) will hold all of Tribune’s outstanding common stock, and Zell will hold a subordinated note and a warrant entitling him to acquire 40 percent of Tribune’s common stock, at an aggregate exercise price initially of $500 million. Zell will join the Tribune board upon completion of his initial investment and will become chairman when the merger closes; Dennis FitzSimons, Tribune's current chairman, president and chief executive officer, will remain a member of the board, along with at least five independent directors and an additional director affiliated with Zell.
Tribune also announced that it will sell its Chicago Cubs baseball franchise after the close of the 2007 baseball season, along with its 25 percent stake in regional cable sports network Comcast SportsNet Chicago. The Cubs sale, which would be subject to the approval of Major League Baseball, is expected to be completed in this year’s fourth quarter, said Tribune, without naming a prospective buyer.
Tribune has long-term contracts in place for Cubs programming on its television and radio properties WGN-TV, Superstation WGN and WGN-AM Radio as well as Comcast SportsNet Chicago, which was launched in 2004 and will broadcast 72 regular season Cubs games in 2007.
The first stage of the privatization transaction, anticipated to be completed in the second quarter of 2007, is a cash tender offer for approximately 126 million shares at $34 per share. The tender offer, which would return some $4.3 billion to shareholders, will be funded by incremental borrowings and a $250 million investment from Zell. The second stage is a "merger," expected to close in the fourth quarter, in which the remaining publicly-held shares will receive $34 per share. Zell will make an additional investment of $65 million in connection with the merger, bringing his investment in Tribune to $315 million.
Tribune said that its board of directors, on the recommendation of a special committee composed of independent directors, has approved the agreements and will recommend Tribune shareholder approval. Representatives of the Chandler family, which has been pushing for a change in Tribune's corporate structure for years in order to monetize their stake in the company, abstained from voting as directors. But Tribune says that the Chandler Trusts have agreed to vote in favor of the transaction.
"As a private company, Tribune will have greater flexibility to transform our publishing/interactive and broadcasting businesses with an eye toward long-term growth," said Fitzsimons in a statement. "Importantly, our employees will have a significant stake in the company’s future. Tribune’s local media businesses have succeeded through the years by serving their communities well, by providing great journalism and programming to readers, viewers and listeners and by creating value for advertisers who need to reach them. That will not change."