The sniping over the future of Tribune Co. escalated Thursday as the media conglomerate's independent directors responded to this week's scathing attack on the company by the former owners of the Los Angeles Times.
The directors denounced as "untrue" and "unfounded" the Chandler family's allegations -- leveled in a regulatory filing Wednesday -- that Tribune's board acted rashly in launching a $2-billion stock buyback now underway.
"We completely reject your assertion that the action of Tribune's board in authorizing the tender offer was 'hasty and ill-informed,' " the directors said in a letter addressed to the two Chandler trusts that control 12% of the company's stock and thus are the company's second-biggest shareholders.
Tribune's debt, meanwhile, was downgraded to junk status Thursday by Moody's Investors Service, which cited concerns about the additional leverage the Chicago company would be taking on to finance the repurchase of as much as 25% of its stock.
Moody's said Tribune's plan to divest $500 million of assets and achieve $200 million in cost savings this year did not fully ease the bond rating firm's concerns.
Yet the junk status of the company's bonds didn't hold back equity investors. Tribune's stock rallied 57 cents to close at $32.51 after a Wall Street analyst upgraded the shares because the boardroom squabble, she said, could force an asset sale that would unlock "significant" value.
It is the first time since Tribune announced the buyback May 30 that shares have closed above $32.50 -- the maximum amount the company has offered to pay.
If Tribune stock stays elevated over the next 10 days as investors consider tendering their shares, the company's efforts to buy back 53 million shares would be hampered. The tender, designed to return money to shareholders and lift the stock, expires June 26.
In their latest letter, Tribune's independent directors said the board had considered "a broad range of strategic options" over several months.
They also said the board had heard extensive presentations from management and consulted with advisors from Merrill Lynch & Co. and Citigroup before choosing a course "in the interests of all shareholders."
In a statement late Thursday, the Chandler family of Los Angeles reiterated its rebuke of the company's efforts to consolidate ownership through a buyback instead of pursuing a more dramatic restructuring. The Chandlers, who owned The Times for more than a century before selling the paper's then-parent, Times Mirror Co., to Tribune in 2000, favor a spinoff or sale of Tribune's broadcasting division.
