Chicago real estate magnate Sam Zell has emerged as a potential bidder for Tribune Co., several people close to the matter said Tuesday.
Zell, whose Equity Office Properties Trust is the target of one of the biggest bidding wars in Wall Street history, has approached the Chicago-based media company that owns the Los Angeles Times with a complicated proposal that may include taking an equity stake while adding debt to fund a large dividend for shareholders, these people said.
One person said Zell had spoken with Tribune's second-largest shareholder, the McCormick Tribune Foundation, about his interest in trying to structure the deal. Zell probably would need the foundation's support to make a deal work. The foundation is run by current and former Tribune Co. executives, including former Chairman and Chief Executive John Madigan and current Chairman and CEO Dennis FitzSimons.
Zell did not respond to a request for comment. A spokesman for Tribune, which also owns the Chicago Tribune, KTLA Channel 5, the Chicago Cubs and other media assets, declined to comment.
Sources said talks between Zell and Tribune were preliminary. Tribune's special board committee overseeing the auction process will meet early next week to consider its options. Zell's proposal may take a back seat to efforts by management to structure what Wall Street calls a "self-help" deal.
Sources said Tribune management has been exploring options that would allow the company to pay shareholders a large dividend without loading up on debt. That could be accomplished by getting a substantial equity stake from an investor like Zell or a private-equity firm. But management would prefer to restructure without reaching outside the Tribune sphere, one person said.
That might mean inviting the McCormick Tribune Foundation to contribute its 13.1% stake in the company as equity in a recapitalized company. Then, if Tribune added debt to pay a dividend to existing shareholders, the foundation could invest all or part of its dividend in the new company. Tribune might also consider adding value by loading some debt onto its broadcast assets and spinning them off.
FitzSimons and two other Tribune executives recused themselves from the foundation board, leaving the decision on whether to participate in any deal to Madigan and James Dowdle, the former head of Tribune's broadcast unit.
