WASHINGTON — Tribune Co.'s shareholders are set to vote in late August on an $8.2-billion proposal to go private, but the Chicago-based media company has other hurdles to clear before the deal can be completed.
Washington regulators must agree to transfer the licenses of Tribune's 23 TV stations and one radio station to the new company, led by real estate mogul Sam Zell, and to issue waivers allowing it to hold on to TV stations in Los Angeles and four other cities where Tribune also owns newspapers, including The Times.
In addition, borrowing terms have grown more onerous since Zell made the proposal in April, making it costlier to finance the transaction. The company is expected to be saddled with about $10 billion in debt even after an expected sale of the Chicago Cubs baseball team.
Wall Street has signaled its skittishness, sending Tribune shares down to $29.25 late last month after they had hit a high in late May of $33.20. The Zell deal is worth $34 a share if it is completed.
The stock closed Tuesday at $30.14, up 23 cents, on a holiday-shortened trading day.
One contributor to the uptick: Deutsche Bank analyst Paul Ginocchio, who upgraded Tribune stock to "buy" from "hold" this week after expressing misgivings last month about whether the deal would close. After discussions with the company, investors and other analysts, Ginocchio said he concluded that financing appeared to be firmly committed. He also calculated that Tribune would have a $72-million cushion above the crucial debt-to-cash-flow test even if revenue growth was worse than expected in the last half of the year.
Ginocchio also predicted that the Federal Communications Commission would issue the needed waivers. Tribune itself is bullish. "We hope and expect to get FCC approval before the end of the year," Tribune spokesman Gary Weitman said.
Zell wants to close the deal by December and to keep the deal from collapsing needs FCC waivers to hold on to KTLA-TV Channel 5 and TV stations in New York, Chicago, Fort Lauderdale, Fla., and Hartford, Conn. Federal regulations prohibit the ownership of a newspaper and a TV station in the same city.
The waivers normally would be routine because business-friendly Republicans control the FCC. But in a stroke of bad timing for Tribune, Democrats took control of Congress in January and immediately toughened oversight of the agency.
