KEY POINTS:
Tribune Co's biggest shareholder and a group led by two Los Angeles billionaires submitted rival bids for the company, while private equity firm Carlyle Group reportedly offered to buy Tribune's TV station group.
The offers for the entire company came in at only a small premium, reflecting concerns
over the future of the newspaper industry. News of Carlyle's bid surfaced late yesterday, spicing up the auction.
Tribune's largest shareholder, Chandler Trusts, submitted an offer that would break the company up by taking the newspaper assets private, according to a regulatory filing yesterday.
Another offer, from billionaires Eli Broad and Ron Burkle, takes the form of a leveraged recapitalisation, a source said.
Carlyle submitted a bid for the TV station group, a division analysts value at around US$4 billion ($5.8 billion), the Wall Street Journal reported, citing a person familiar with the situation.
Under pressure from unhappy shareholders worried about declining newspaper circulations and weak advertising sales, Tribune, which owns the Chicago Tribune, the Los Angeles Times and the Chicago Cubs baseball team, had invited buyout proposals in an auction that closed on Wednesday afternoon.
While the premiums offered for the whole company were relatively small, there had been concern that the auction might not draw any offers at all after several private equity firms looked at Tribune and decided to pass on the auction.
"Lo and behold, there is a Santa Claus," Benchmark Co analyst Edward Atorino said.
Although few potential buyers have shown interest in making big investments in a struggling industry, publishing nonetheless offers strong cashflow and prestige for owners.
Neither Tribune bid is as high as some analysts had expected.
The Chandlers' bid, which would separate Tribune's publishing and broadcast businesses, values the company at US$7.6 billion, based on US$31.70 a share, a 4.5 per cent premium to its Wednesday closing price.
The Chandlers' said in their filing with the US Securities and Exchange Commission that they were "working in conjunction with two private equity firms" although they did not name them.
The proposal from Broad and Burkle offers a higher 12 per cent premium of US$34 a share, according to the unnamed source, valuing the company at US$8.2 billion.
Shares of Tribune rose nearly 2 per cent to US$30.90 in New York Stock Exchange trade.
Some analysts said the bids were not high enough for the Tribune board. After all, the stock had hit a year high of US$34.28 last September, after the company said it would explore its options.
"We do not feel the board will find either of these proposals very compelling, suggesting it may pursue further negotiations to extract more value," Dave Novosel, an analyst at Gimme Credit, an independent research service, said in a note to clients.
In the Chandler proposal, the family defended its buyout price by stating that the stock would be trading today at only US$27 a share if expectations of a deal had not inflated the shares.
The Chandler proposal calls for shareholders to get US$19.30 in cash and all the outstanding stock of a new company that would contain Tribune's broadcasting business. The newspaper business, the weaker of the divisions, would be controlled by the Chandlers. Their bid expires on January 31.
Acquiring the newspapers would mark an unexpected return to publishing for the Chandlers. The family owned and ran the Los Angeles Times for more than a century before selling it, along with Times Mirror Co, to Tribune in 2000 for US$8.3 billion.
Burkle and Broad's offer is made up of a US$27 dividend and equity valued at US$7 a share. They propose to put US$500 million of their cash into Tribune in exchange for about 30 per cent of the newspaper and broadcasting group, the source said.
Existing management would run the company, but Burkle and Broad may take board seats. As there would be no change of control, such a deal would be completed more quickly than a pure takeover, the source said. Tribune would continue to be publicly traded.
Grocery magnate Burkle owns private equity firm Yucaipa. Broad founded home builder KB Home.
- REUTERS
