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Charity may join bid for Tribune

The foundation that is the media firm's No. 2 shareholder takes a step to explore its options.

January 05, 2007|Thomas S. Mulligan | Times Staff Writer

With a bidding deadline for Tribune Co. set for Jan. 17, the charitable foundation that is the media company's second-largest shareholder said Thursday that it had hired Blackstone Group as an advisor on courses of action that could include selling its 12% stake or joining in a bid for the parent of the Los Angeles Times.

The McCormick Tribune Foundation, which holds about 28 million Tribune shares, also said it had signed a nondisclosure agreement with the company, enabling it and Blackstone to look at nonpublic financial information about Tribune. Several private-equity firms previously signed such agreements as a prelude to making bids.

Among the possible actions the foundation outlined in a regulatory filing Thursday were "making additional purchases of [Tribune] common stock or disposing of its shares."

As a public charity, the foundation is not legally barred from owning a controlling stake in Tribune, but experts said it lacked the resources to be a lead bidder for a company that would cost more than $10 billion, including the assumption of debt. Besides The Times, Tribune owns the Chicago Tribune and nine other newspapers, 23 television stations and the Chicago Cubs baseball team.

Bear Stearns analyst Alexia Quadrani said in a note Thursday that the foundation's move amounted to "a vote of no confidence" in Tribune management. But the foundation shot back a denial, saying it "continues to have complete confidence" in management.

The foundation's directors "are under a legal obligation to protect and enhance the value" of the assets -- including Tribune stock -- that fund its charitable activities, spokesman Joseph A. Hays said.

A media executive who has followed the Tribune situation closely described Blackstone's hiring as a defensive maneuver against possible low-ball bidding.

"McCormick needs to be in the position to closely and astutely judge any bids that do come in," said the executive, who declined to be named because he had been given the information confidentially.

The Chandler family of Los Angeles, Tribune's largest shareholder group, with about 20% of the stock, has had discussions with Los Angeles billionaires Eli Broad and Ron Burkle about bidding for all or part of Tribune, according to people familiar with their plans. It was the Chandlers who pushed Tribune toward the auction by publicly criticizing management last summer.

Three large private-equity firms -- Madison Dearborn Partners of Chicago, Apollo Management of New York and Providence Equity Partners of Rhode Island -- also are exploring a combined buyout bid that, if successful, would probably leave Tribune's current management in place, an advisor to the consortium said.

Entertainment mogul David Geffen made a $2-billion bid for The Times in November that was rejected as premature. Among media companies, only Gannett Co. has shown interest in the auction, making a nonbinding bid for the whole company last month. Several other private-equity firms also have made nonbinding offers.

Tribune initially said it intended to resolve the ownership issue by the end of 2006, but confronted with lackluster bidding the company said it would aim to conclude the process in the first quarter of this year. The auction has come amid sliding readership and advertising revenues for newspaper companies and declining viewership and ad rates for broadcasters as the popularity of the Internet grows.

The hiring of Blackstone all but disqualifies its private-equity division from bidding on Tribune, said a private-equity expert who declined to be identified because his firm could be involved. It is not unprecedented for a firm that acts as an advisor to later emerge as a buyer, but because of the conflicts of interest it is frowned upon, this person said.

The McCormick Tribune Foundation and the related Cantigny Foundation, which has a 1.4% stake in Tribune, grew out of trusts established in 1955 under the will of Col. Robert R. McCormick, the company's longtime chairman and controlling shareholder. Its offices are in the Tribune Tower, the downtown Chicago landmark that is also Tribune's headquarters.

The foundation's board is chaired by Tribune Chairman and Chief Executive Dennis J. FitzSimons. Its other directors are Scott C. Smith, Tribune Publishing's president; Times Publisher David D. Hiller; retired Chairman and CEO John W. Madigan, and retired Executive Vice President James C. Dowdle. Dowdle, as longtime head of Tribune Broadcasting, was a FitzSimons mentor.

The three current Tribune and Times executives have recused themselves from deliberations regarding the company's fate. The foundation said it had appointed the nonemployee directors, Madigan and Dowdle, as a special advisory committee to oversee Blackstone. The Chicago law firm of Katten Muchin Rosenman was hired as the special committee's legal counsel.

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