Sam Zell, a Chicago real estate magnate who made a fortune by turning around distressed properties, has emerged as a strong contender to buy the company that owns the Los Angeles Times, KTLA-TV Channel 5 and the Chicago Cubs baseball team, according to people familiar with ongoing negotiations.
Zell's bid for Tribune Co. is getting serious consideration because it could buy out the disgruntled Chandler family of California and take the company private, said one Tribune executive who asked not to be named because details of the company's auction were supposed to remain confidential. That scenario is attractive to Tribune management because it would remove the company from the pressure of Wall Street investors.
The media conglomerate's financial representatives have been negotiating with Zell in an effort to drive up the value of his offer, said the Tribune executive and a businessman who has spoken to Zell.
At a real estate industry event last week, the 65-year-old real estate tycoon called his bid for the company something of a longshot. Neither he nor Tribune has given details of the plan. But the Tribune executive said Tuesday that the proposal "appears to have real legs."
Zell has made a fortune -- estimated by Forbes at $4.5 billion -- by finding value in properties where others saw trouble. He sold his Equity Office Properties Trust last month to Blackstone Group, a New York private equity firm, for $39 billion.
The motorcycle-riding investor has dubbed himself "the Grave Dancer" for his ability to pump new life into struggling enterprises. He has specialized in real estate but also invested in department stores, Chicago's Midway Airlines and Schwinn Bicycle Co.
Some Tribune insiders had initially seen Zell's play as a distraction that would merely delay their own reorganization plan. But that view seemed to be changing. A business associate who spoke to him recently said that, despite his public reserve, Zell believes he has a better than 50-50 chance of buying Tribune.
Zell acknowledged that he proposed buying the company by creating an employee stock ownership plan, which could limit his tax bill. He said the company would be owned by a partnership between him and the employee stock plan.
Zell's proposal came late in the 5-month-old auction for Tribune, which was sparked when the Chandlers complained about the company's sagging fortunes. Before Zell's bid, whose value hasn't been disclosed, Tribune had not received any bids for the entire company at a price significantly above the company's stock market value.
Instead, Los Angeles billionaires Eli Broad and Ron Burkle offered to reorganize Tribune and pay a large dividend while borrowing heavily, a private equity firm proposed to buy Tribune's 23 television stations, entertainment mogul David Geffen bid $2 billion for The Times alone; and the Chandlers, owners of 20% of the company, floated a plan that would give them control of the company's daily newspapers.
Not impressed with any of those offers, a special committee of Tribune's board had been studying a reorganization proposal under which the company would spin off the TV stations and pay a large dividend to shareholders.
At least a few executives within the company said they were anxious that the so-called "self-help" proposal, like some of the others, would saddle Tribune with substantial debt, while also leaving it as a public concern answering to Wall Street.
"It sounds like the worst of both worlds," said one Tribune manager, who asked to remain anonymous so as not to anger his bosses.
The Tribune executive familiar with Zell's proposal said that many "complexities" remained to be resolved but that "it might be preferable if all of those things can be worked out." The company has said it plans to conclude its review by the end of March. But the executive said the board now hoped it could wrap up its deliberations by the middle of the month.
The Chandlers had hoped that an auction might drive the price of the company into the mid-$40s per share.
Instead, the stock has continued to languish. At Tuesday's closing price of $30.21, it's trading only slightly above where it was when the Chandlers launched their protests last June.
Tribune insiders believe that the internal proposal would be advantageous because it could be wrapped u p quickly.
A sale to Zell, in contrast, could take many months and require, among other things, approval from the Federal Communications Commission to allow the company's continued cross-ownership of newspapers and television stations in the same markets.