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L.A. duo reenters Tribune auction

Broad and Burkle say their late offer for The Times' owner tops what was the leading bid.

March 30, 2007|James Rainey | Times Staff Writer

The seesaw battle for Tribune Co. tilted again Thursday evening, when Los Angeles billionaires Eli Broad and Ron Burkle said they would pay $1 more a share than real estate mogul Sam Zell, who had been viewed as the front-runner to acquire the media company.

Broad and Burkle made their offer as Chicago-based Tribune approached a self-imposed Saturday deadline to determine its fate. It reportedly had been on the verge of accepting a $33-a-share bid from Zell.

A Tribune spokesman declined to comment on how the company and its directors might respond to the 11th-hour offer from Broad and Burkle. A person familiar with the billionaires' proposal said it was similar to that of Zell, who planned to use an employee stock ownership plan, or ESOP, to fund much of the deal. Broad and Burkle said in a letter to Tribune directors that their offer was worth $34 a share.

Tribune shares have surged in recent days in anticipation of a deal with Zell. The stock closed Thursday at $31.53, up 40 cents, before the Broad-Burkle offer.

The company owns the Los Angeles Times, the Chicago Tribune and KTLA-TV Channel 5, plus 22 other television stations, nine other daily papers and the Chicago Cubs baseball team. It has been on the block for six months, since its largest shareholder -- California's Chandler family -- complained that the company was undervalued and said it should be broken up or sold.

A corporate governance expert said that the special committee of Tribune directors appointed to examine the company's options would be required to give the Broad-Burkle proposal a fair hearing, even if a deal with Zell had been near.

"What the board has to do is evaluate the proposals thoroughly and choose the one that gets the highest possible value for shareholders. That is their legal obligation," said Charles Elson, a professor of corporate governance at the University of Delaware.

Elson said he had only passing familiarity with the Tribune auction. "Merely because they say this new offer is worth $34 doesn't mean it's worth $34," he said. "And the same is true of earlier offers. That's what they have to evaluate and then choose the best offer."

Tribune shareholders had hoped that a sale would bring a higher price for the company. The Chandlers, one-time owners of the Los Angeles Times, had cited analyst estimates of Tribune's value at $46 a share.

But continued woes in the traditional media business, including a gradual loss of advertising to the Internet, have sent newspapers' revenues down sharply. That frightened off some of the investment firms that initially expressed interest in Tribune.

Broad and Burkle, who made their fortunes in real estate and supermarkets, respectively, have long expressed interest in restoring local ownership to The Times. They said that would assure a quality newspaper for Southern California.

But Tribune spurned an offer the two made in January. That proposal would have recapitalized the company, paid a $27 dividend and made the magnates co-chairmen. But Tribune executives said privately that they could accomplish their plan without the help of outsiders.

The person familiar with the letter from Broad and Burkle said they essentially proposed copying the structure of Zell's deal, in particular the tax-efficient use of an ESOP to facilitate the buyout.

The partners proposed infusing $500 million of their own money into the company, more than the $300 million Zell reportedly offered.

The Los Angeles billionaires would not comment Thursday, and Zell, who is said to be worth about $4.5 billion, could not be reached.

Zell recently realized about $900 million from the sale of his Equity Office Properties Trust. He has said that he plans to maintain Tribune's current structure, rather than sell assets, and that he has a purely economic interest in the media company.

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