Times Mirror Co., parent company of The Times, has agreed to be taken over by Tribune Co., owner of the Chicago Tribune and more than two dozen other media properties, including KTLA Channel 5 in Los Angeles.
The $6.46-billion transaction would create the nation's third-largest newspaper company and end more than 100 years of local ownership of The Times by the Otis and Chandler families.
It would leave The Times--long the dominant news medium in California--as a wholly owned subsidiary of the Chicago-based Tribune Co. and make Los Angeles the largest city in the country without a locally owned metropolitan daily. The deal would also effectively mark the demise of Times Mirror at a time of increasing, large-scale media consolidation, marked most dramatically by the pending $163-billion merger announced two months ago by Time Warner and America Online.
The loss of Times Mirror would leave Atlantic Richfield Co. as the only remaining Fortune 500 company based downtown, and Arco won't be an independent company if it is acquired by BP Amoco under a proposed deal awaiting antitrust approval.
Under the terms of the Times Mirror-Tribune deal, Times Mirror shareholders will have a choice of taking $95 per share from Tribune Co. or exchanging each of their Times Mirror shares for 2.5 shares of Tribune Co. stock (which represents about $93).
In either case, the offer represents a premium of almost double Friday's closing price of $47.94 for Times Mirror stock. That offer would be good for up to 28 million of Times Mirror Class A shares, which represent nearly 42% of the outstanding Class A and Class C shares. If the tender offer is fully subscribed, Tribune Co. will pay out $2.66 billion in cash. Tribune Co. also will assume $1.4 billion in Times Mirror debt.
The premium is one of the highest ever paid for a publicly traded company. Because the deal--which was approved late Sunday night by the Times Mirror board of directors--did not involve competitive bidding, it includes a mechanism under which other bidders would have 20 calendar days to top Tribune Co.'s offer.
Although the Tribune-Times Mirror deal must still be approved by shareholders, the Chandler family initiated the negotiations and owns 66% of the voting shares, which they've pledged to vote in favor of the deal.
Federal regulatory agencies will also review the terms of the transaction, but Mark Willes, chairman and CEO of Times Mirror, said late Sunday night that since the two companies do not directly compete in any market, he would be "astounded" if the government raised any objections.
CEO Was 'Totally Surprised'
Willes said he first learned of the negotiations less than two weeks ago and was "totally surprised" since he was "under the impression that under the terms of the Chandler family trust, the paper could not be sold or merged." Negotiators worked around that concern by giving the Chandler family four seats on an expanded, 16-member Tribune Co. board and by giving them 40% of the membership of a new Los Angeles Times board.
Although they will not have control of that board--or of daily operation of The Times--they will have certain "special rights," including a direct involvement in the selection of the publisher of The Times.
Willes said he did not know if Tribune Co. would want a new publisher for The Times, but he said he would definitely not stay with the company beyond the 90 to 180 days required to complete the deal. Kathryn Downing, publisher of The Times, said she does not intend to resign "just because the paper was sold." Willes said he and other Times Mirror executives would be given severance packages.
The acquisition would give Tribune Co. daily newspapers in the country's three largest cities--New York (where Times Mirror owns Newsday), Los Angeles and Chicago, and is part of a long-range Tribune Co. strategy of owning multimedia assets in the same markets. The company owns 22 television stations and with its cable and satellite coverage, reaches 75% of U.S. television households. It has long promoted synergy among its various media properties, including a cable TV station and what is widely regarded as one of the best newspaper Internet sites.
The Los Angeles Times began publication in 1881 as the Los Angeles Daily Times and was purchased by Gen. Harrison Gray Otis in 1884. The paper was long a major civic booster for Los Angeles and Southern California, playing a major role in the dramatic growth of the region.
The paper was financially profitable but was widely regarded as a partisan and parochial journalistic mediocrity until Otis Chandler took over as publisher in 1960. Chandler, the great-grandson of Gen. Otis, who had purchased part ownership of The Times in 1882, a year after it began publication and served as its publisher for 35 years, was determined to create a world-class newspaper.