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Talk Grows of Possible Sale of L.A. Times

Local investors express interest in bidding for the Tribune Co. paper amid a boardroom rift.

June 14, 2006|Joseph Menn | Times Staff Writer

Could the Los Angeles Times once again be up for sale?

That question is on the minds of several of the city's richest businessmen, who reaffirmed this week their interest in bidding for the country's fourth-largest daily newspaper.

Billionaire investor Ron Burkle, former Olympics organizer and Major League Baseball Commissioner Peter Ueberroth and philanthropist Eli Broad have indicated in recent interviews or in comments to others that they would like to buy The Times or see it in local hands.

"The L.A. Times is a world-class brand," Ueberroth, a financier and former travel entrepreneur, said in an interview this week. "We're always attracted to quality brands."

Though analysts estimate that The Times could sell for about $1 billion, Publisher Jeff Johnson said the paper was not for sale. With about $1 billion in annual sales, the paper accounts for about 18% of Tribune's revenue and about 17% of operating profit.

One deterrent would be the huge tax burden Tribune would incur in an outright sale.

Yet investors and analysts said Tuesday that a rift between the paper's owner, Tribune Co., and its second-largest shareholder, the Chandler family of Los Angeles, had the potential to put The Times in play.

If that happens, the Chandlers could once again act as kingmaker. A clause in the $8-billion agreement by the Chandlers in 2000 to sell the paper's parent, Times Mirror Co., to Tribune gives the family the right to veto a sale of the flagship newspaper.

The Chandlers, who control three of Tribune's 11 board seats, are not pressing for a sale, according to people familiar with their strategy. Nor are they interested in reacquiring The Times should it come up for sale, the sources say.

The boardroom rift centers on Tribune's plan to take on more than $2 billion in new debt to buy back 25% of the company's stock. Tribune is offering to pay $28 to $32.50 a share, but the Chandlers have opposed the buyback, according to recent securities filings. Tribune has said it planned to proceed with the buyback.

That has helped drive up Tribune shares, which closed Tuesday at $31.05, down 60 cents, as investors anticipated a more dramatic restructuring.

"One has to assume that something is going to happen to Tribune," said analyst John Morton of Morton Research Inc. "Once that virus of a major change in the company gets established -- and it's certainly been established in Tribune -- it's very hard to get rid of it."

Analysts say a likely scenario is a spinoff of Tribune's television stations, a move favored by the Chandlers. That would leave Tribune's 11 newspapers a more affordable target for acquisition singly or in bulk.

"It might open the door to dispose of the papers, and you could probably get more if they were sold as individual papers," Morton said.

Until recently, newspapers were considered more valuable in groups, because resources could be shared among them to lower costs. But Sacramento's McClatchy Co., which is buying No. 2 chain Knight Ridder Inc., has changed the conventional wisdom.

McClatchy is keeping the most profitable Knight Ridder papers and selling 12 others. By selling those in ones and twos, it has won higher sums than it paid for all of Knight Ridder. Tribune investors have paid close attention to the McClatchy sales, as have potential buyers of The Times.

"The McClatchy-Knight Ridder auctions have proven there's trophy value to these big properties within local communities, and one has to assume that large shareholders are observing that," said industry analyst Kara Cheseby of T. Rowe Price, which held 4.7% of Tribune's shares as of the end of March.

Last year entertainment mogul David Geffen told Tribune Chief Executive Dennis FitzSimons he would be interested in The Times. He was rebuffed, but the sentiment has spread.

Burkle's Yucaipa Cos. investment firm had bid for the 12 orphaned Knight Ridder papers and is interested in The Times.

"Yucaipa has been interested in exploring the opportunity to purchase newspapers for some time," Burkle said in a written statement.

"The chance for the L.A. Times to be locally owned again is an opportunity that should not be missed."

Burkle and Ueberroth declined to say what recent actions they have taken, if any, and Geffen and Broad declined to comment. But people familiar with Broad's thinking said the billionaire, who made his fortune in home construction, would support local ownership, especially if nonprofit organizations were involved.

Broad broached the subject this week with Chandler advisor Thomas Unterman and was told that nothing would happen before this fall. That is when the second and larger of two investment partnerships that hold the Chandlers' stake in Tribune can be dissolved without a tax penalty.

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