Chandler Family Calls For Breakup of Tribune Co.

The Chandler family, the second largest shareholder of Tribune Company, yesterday called for the company to be broken up and rejected the company’s own plan to buy back $2 billion in share as a financial gimmick. Though many independent analysts agree with the family’s plea, it remains unlikely to succeed because of the company’s ownership structure and management’s stated intention to move the company along a less radical path.In a letter to the Tribune Company board, the Chandler trusts, which own 12% of the company’s shares, said the company’s strategy of owning multiple major press and broadcasting properties in the nation’s three largest markets has “failed” and that the wiser course would be to pursue “strategic alternatives,” including selling the company’s newspapers or selling the entire company. Because management has failed to maximize shareholder value, the family said, it would not tender any shares in the buyback plan the company announced last week.The family’s letter denounced that plan as “a purely financial device that fails altogether to address the real business issues facing Tribune.”The tumult at Tribune Company – which owns the Los Angeles Times, the Chicago Tribune and Newsday, 26 television stations, and the Chicago Cubs – comes at a time of deepening distress for newspapers, as well as for other traditional press and broadcasting companies. Circulation is almost universally down. Most newspaper company shares are down at least 20% over the last year.Tribune’s shares, however, have enjoyed a recent surge, in part because of the buyback and in part because of news of the Chandlers’ dissent instilled hope that management would take make some more dramatic effort to appease investors. Tribune shares have risen by 12% on the New York Stock Exchange, to $31.03 from $27.69, in the last three weeks. Yesterday, they were up 89 cents, or 2.9%, to close at $31.94 on news of the Chandlers’ letter.But so far the board has not moved beyond the plan to buy back about onefifth of the company’s shares, and a company spokesman offered no response to the letter.“It’s not going to happen in the near term because the board has said it doesn’t want it to happen,” said Porter Bibb, managing partner of Mediatech Capital Partners, an investment bank that specializes in press and broadcasting companies. Mr. Bibb agreed that Tribune, like most other conglomerates, has not recognized synergies. But with newspapers so out of favor, it made sense to wait for them to “bounce off the bottom,” he said.In their letter, the Chandlers said that Tribune said that the value of joining television and newspaper properties has proved elusive or nonexistent. They also noted that the laws allowing the cross-ownership of television and newspaper properties in the same city (now routinely waived) have not been made permanent.At the same time, though, many big newspapers remain solidly profitable – at least for the time being. The fear is that as they continue to lose readers and advertising to the Internet, their profitable days are numbered. Even the New York Times’s management has been attacked for failing to maintain shareholder value – its share price is down most of all.But there is still substantial value in individual newspapers, value that could be unlocked if the papers were sold off, said Rob Cox, the American editor of Breakingviews, a financial commentary service based in London. Mr. Cox says “private investors covet [newspapers] like local trophies,” and that the value of local papers are “stuck in the sarcophagus of national corporations.”This is the strategy followed by Mc-Clatchy Company, which has signed deals to 11 papers it came to own after its $4.5 billion cash-and-stock acquisition of Knight Ridder Incorporated,Mr. Cox notes.The Tribune papers are generally more prestigious and in larger markets.As word of dissension at Tribune Company spread, Los Angeles-based entertainment mogul David Geffen reportedly expressed interest in buying the Los Angeles Times and was told by Tribune’s chairman and CEO, Dennis FitzSimons, that the paper was not for sale.In Chicago, Hall of Fame shortstop Ernie Banks expressed interest in brokering a deal to buy the Cubs. He was sent away with the same message.The Chandler family became the second largest holders of the company’s shares when Tribune purchased the Times Mirror Company, which the Chandlers controlled, in 2000.

Chandler Family Calls For Breakup of Tribune Co.

Chandler Family Calls For Breakup of Tribune Co.

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