Tribune Co. said Monday that it would spend as much as $2.4 billion to buy back up to 25% of its shares, a move designed to reverse a two-year slide in the media company's stock price and ward off calls for more drastic action.
Chicago-based Tribune also said it planned to sell at least $500 million in assets and to cut $200 million in annual operating costs, partly through layoffs. The company owns 11 daily newspapers -- including the Los Angeles Times and Chicago Tribune -- and 26 TV stations including KTLA.
One analyst described the moves as a "preemptive strike" against any demands from unhappy shareholders to break up the company or sell it. Newspaper stocks have suffered in recent years as readers and advertisers have defected to the Internet. Pressure from the three largest shareholders of Knight Ridder Inc. forced the planned sale of that company to McClatchy Co. this year.
"We think it's a step in the right direction, an endorsement of the company and a statement by management that they really believe in the publishing, media and broadcast businesses," said Barry L. Lucas, an analyst at Gabelli & Co., whose parent firm owned 1.6% of Tribune's stock at the end of April.
Debt-rating services reacted negatively to the plan and slashed the company's rating several notches, bringing it to the brink of junk status. Tribune said it would borrow as much as $3.4 billion to pay for the buyback and to refinance some of its existing debt.
Tribune Chief Executive Dennis FitzSimons defended the repurchase program and said repaying some of the new debt would be a top priority.
"We believe that Tribune's current stock price does not reflect the value of the company or the potential we have for creating shareholder value," he told investors during a conference call. "We're optimistic about the prospect for improved performance at our media businesses."
Tribune shares jumped $2.01, or 7.2%, to $29.90, on a day the broader stock market fell sharply. In early 2004, Tribune traded above $52.
To help pay down the new debt, FitzSimons said he would look to sell "non-core" businesses outside of the company's media holdings in Los Angeles, New York and Chicago. He said Tribune would keep the Chicago Cubs baseball team, which some investors have said should be sold. Analysts said that television stations in smaller markets were likely targets for sale.
