THERE'S a certain metaphoric resonance in the fact that investor Sam Zell struck his final bargain with Tribune Co.'s directors in the middle of the night.
When it comes to the journalism the Los Angeles Times and the company's other newspapers offer their readers, this whole arrangement is pretty much a shot in the dark.
For The Record
Los Angeles Times Wednesday April 04, 2007 Home Edition Main News Part A Page 2 National Desk 0 inches; 30 words Type of Material: Correction
Times sale: The Regarding Media column in Tuesday's Calendar section said the L.A. Times had been sold twice in five years. The paper has been sold twice in seven years.
If the deal goes through as structured, the Chicago-based real estate entrepreneur throws in a few hundred million of his own billions and the company antes up all the money it would have paid into the employees' 401(k)s, forming a new, Zell-controlled partnership that buys up all the existing stock and turns Tribune into a privately held company.
Monday, some analysts were a bit puzzled over where the deal is in this deal?
The Wall Street Journal's Dennis Berman characterized Tribune's announcement Monday as an admission "that it couldn't really find a buyer, and that it is essentially buying itself, with Sam Zell throwing in some spare change."
Laura Martin of Soleil Securities told MarketWatch that the arrangement "smacks more of financial engineering than true value creation."
Apparently, Zell's leadership is the value being added in this arrangement. He, however, has said he has no editorial aspirations, that he regards this acquisition as a purely financial opportunity and will leave the current management in place.
Tribune Chief Executive Dennis J. FitzSimons said Monday that, "operating outside the glare of the public markets, we will be better able to focus on long-term growth as we transform our publishing and broadcasting businesses."
That's certainly possible. Free of Wall Street's quarterly demands, the new private company can theoretically divert its substantial cash flow into maintaining service to readers and viewers while reinvesting in the technology that will create the new print-online-broadcast hybrids that surely are American journalism's future vehicles.
Theoretically is the operative word here.
The new, private Tribune will have swapped the demands of stockholders for roughly $12 billion in debt to make this deal happen. Will those creditors be more forgiving than the capital markets? Maybe, so long as Zell and the other equity partners, whoever they may be, are willing to forgo potential revenue from this arrangement for the sake of reinvestment and the maintenance of quality journalism.
