Talks over Tribune sale rest on 2 bids

The Baltimore Sun

CHICAGO -- Unable to reach a verdict Friday, Tribune Co.'s independent directors planned to resume deliberations yesterday on whether to accept Chicago billionaire Sam Zell's $33-per-share proposal for the media company or a rival 11th-hour offer from Los Angeles billionaires Eli Broad and Ron Burkle worth $34 a share, sources said.

A meeting of the full Tribune board is scheduled for today, when a final decision could be voted on.

Tribune owns The Sun, as well as the Los Angeles Times and the Chicago Tribune.

The committee of independent directors, which has been reviewing strategic options since September, was reportedly leaning toward Zell's plan to take the company private, in part because the offer from Broad and Burkle was viewed as less concrete.

A source familiar with the situation said a Tribune representative contacted Broad and Burkle after Friday's committee meeting to present a series of questions concerning their proposal, indicating that it was still being considered.

Tribune stock gained 58 cents, to $32.11, on the New York Stock Exchange.

Zell's bid became attractive to Tribune's board because it is structured around an employee stock ownership plan, or ESOP, which creates certain tax advantages. Those advantages will allow the company's cash flow to support more debt. The real estate tycoon plans to invest about $300 million in equity.

Submitted after the committee's mid-January deadline for bids, which yielded three unimpressive offers - including a previous bid by Broad and Burkle - Zell's proposal seemed likely to beat a management-led "self-help" plan. Broad and Burkle muddied the picture late Thursday, when they submitted a revised bid modeled after Zell's ESOP financing.

Broad and Burkle, in January, had proposed what they called a "public leveraged buyout," in which they would invest $500 million in equity, pay shareholders a $27 dividend, load the company with debt and leave a publicly traded stock they said would be worth about $7 a share. But Tribune's board passed up the offer because the value of the "stub" share was suspect and the deal relied on too much debt.

The duo re-emerged a week ago, complaining that Zell had Tribune information they never got. Broad and Burkle requested and received more data from the company, enabling them to make their late proposal, which they say would pay $1 more per share than Zell's offer and pledges $200 million more in equity.

Because Broad and Burkle's original proposal was criticized on Wall Street for not adding more equity, the source said they've been frustrated that Tribune's board seems so interested in a Zell deal that appears to contain even less equity.

"He's putting up $300 million," a source close to Broad and Burkle said. They "were castigated the first time around for putting up $500 million."

Tribune initially hoped to have concluded its review months ago. But it extended the process, aimed at bucking up a sagging share price weighed down by Wall Street's worries about the growth potential of traditional media, from the end of last year to the end of the first quarter.

Broad, a developer-turned-philanthropist, and Burkle, who made his fortune in supermarkets, each first approached Tribune individually to express interest in buying the Los Angeles Times before the company began its strategic review but were rebuffed.

If Tribune hopes their revived interest will draw Zell into a bidding war, it may be disappointed, according to a longtime friend of Zell's, who has done business with him.

"If you're competitive, does that mean you go to $34.50, or does that mean you tell them you're walking? You're playing liar's poker, and sometimes the winning move is to just walk away," he said. "Part of his genius is understanding human nature. If you're playing poker, it doesn't mean outbidding the other guy if you have a bad hand."

Phil Rosenthal and Michael Oneal write for the Chicago Tribune.

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