Sam Zell's taking effective control of Tribune Co. for a relatively modest cash outlay makes him potentially the biggest winner in Monday's pending sale of the Chicago media company.
The Chicago real estate magnate would be in charge of a company valued Monday at $7.9 billion for an investment of as little as $315 million. That sum would give him an option to buy 40% of Tribune's stock that could be exercised at any time within 15 years of the completion of the deal.
But financial analysts said Zell was unlikely to exercise the option but instead would probably cash it out before its expiration. In the meantime, as chairman, Zell would be calling the shots.
Whether Tribune's employees win depends on whether the company's performance continues to deteriorate as the newspaper and TV industries struggle. All company contributions to employee pension plans would be funneled through a new employee stock ownership plan, or ESOP, beginning next year, after the deal is complete.
That means that although those future pension contributions will be at risk, the employees stand to profit, along with Zell, if the company does well. Existing pension obligations owed to workers would not be affected, company executives said.
Also benefiting would be the Chandler family, which through its Times Mirror Co. controlled the Los Angeles Times for more than a century until the company was sold to Tribune in 2000. The pending buyout would serve the family's desire to exit the newspaper business, while salvaging a fortune that had been eroding as Tribune's stock slid.
The Chandlers' 20% holding of Tribune would be bought out for a total of roughly $1.6 billion. But the payout probably would saddle the Chandlers with as much as $245 million in federal capital gains taxes.
Also getting a payout would be Tribune's top five executives, who at the $34 price hold shares valued at $51.1 million along with millions more in stock options.
Among the early losers in the process would be the holders of Tribune's existing $5 billion in bonds and other long-term debt. The value of their holdings already has plummeted as details of Tribune's big debt load emerge.
The various steps of the multistage transaction require the company to obtain $8.4 billion in new debt, which could carry interest charges of at least 9% because Tribune is rated at junk bond, or below investment grade, level.
