Regulatory Hurdles Face Tribune, $8.2 Billion Deal to Go Private
Taking Tribune’s broadcast assets private in a leveraged buyout valued at about $8.2 billion would require a series of FCC waivers, broadcast officials said. Tribune accepted investor Sam Zell’s offer to take the company private over a similar competing bid by Eli Broad and Ron Burkle. Tribune will take on $7 billion in new debt to complete the deal, some to be paid down by selling the Chicago Cubs and the company stake in the Comcast Sports Net Chicago network. Publicly traded Tribune bonds aren’t involved in the deal. Tribune began considering a sale last year after a large shareholder pushed it to spin off the broadcast group (CD June 15 p18).
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The Media Access Project will oppose granting Tribune any waivers, Pres. Andrew Schwartzman said. Tribune will need 5 waivers of the newspaper-broadcast cross ownership ban -- one for each market in which it owns a TV station and a daily, he said. The markets are N.Y., L.A., Chicago, Hartford and Ft. Lauderdale. Tribune’s ownership of The Tribune and WGN-TV was grandfathered in when cross ownership was banned.
Tribune has run WBZL Miami and the Ft. Lauderdale Sun Sentinel under a waiver good until the Commission completes its review of the cross-ownership ban. Those waivers won’t transfer to the new owner, Schwartzman said. The other 3 markets are more complex, since Tribune is in the midst of renewing its licenses for WGN-TV Chicago, WPIX N.Y., and KTLA L.A. “They can certainly expect fierce opposition,” he said. Tribune hasn’t said whether it plans to keep its TV assets and didn’t respond to our query.
Spinning off or selling the TV stations would be a “dramatic” move for Tribune, and the company probably will try to keep them, said BIA Exec. Vp. Mark Fratrik, who has done work for Tribune. “We're talking about one of the original radio and television stations,” he said, noting that the station’s call letters stand for “World’s Greatest Newspaper.” Tribune’s new owner could find those waivers too tricky to get, Fratrik said: “It’s possible, though I have no inside information on this, that they may still spin off the TV station.”
Tribune might have had an easier path to privatization by accepting the Burkle-Broad bid, Schwartzman said. That deal reportedly involved selling the TV stations. Passing on that offer will make it harder for Tribune to argue that it deserves waivers to keep stations, Schwartzman said: “They've opted to double down on what’s proven to be a bad bet so far.”
The Tribune buyout is notable for not involving private equity groups, as several recent media deals have (CD Oct 30 p3). Private equity groups looked at Tribune, but no deal materialized. “Tribune is in worse shape than the other major publishing companies,” Schwartzman said: “The private equity passed over it.” After the sale, outstanding common stock will be held by an employee stock ownership plan. Zell will hold a subordinate note and a warrant entitling him to buy 40% of Tribune common stock. The transaction be done in 2 stages, which Tribune expects to complete this year. Zell will invest $350 million of his own cash over the 2 stages. “As a private company Tribune will have greater flexibility to transform our publishing/interactive and broadcasting businesses with an eye toward long-term growth,” CEO Denis FitzSimons said in a news release.