Tribune Tightens Grip on L.A. Times

The path toward restoring local ownership of the Los Angeles Times has become more difficult in recent days as the newspaper’s Chicago-based parent company has hardened its stance against selling its most valuable asset individually.

Tribune Co.’s posture could mean that potential buyers of the newspaper would have to make a bid on the entire company, or perhaps its publishing division, to obtain The Times.

Scott C. Smith, Tribune’s president of publishing, said in an interview in Los Angeles this week that he wanted to lay to rest the talk of selling The Times. Apart from a previously announced plan to sell $500 million worth of smaller newspaper or broadcast properties, he said, “individual business units are not for sale at this time.”

That also would apply to Tribune’s other assets that have attracted would-be suitors such as Newsday in New York and the Baltimore Sun.

Some on Wall Street, however, believe that a piecemeal approach may be the best way to maximize the company’s value because certain buyers might be willing to pay a premium for such assets as The Times and the Chicago Cubs baseball team.

“We believe that there are strategic buyers that would be willing to pay healthy multiples for the assets,” analyst Debra Schwartz of Credit Suisse wrote in a report.

Three wealthy Los Angeles businessmen are on record as having an interest in buying The Times: music mogul David Geffen, philanthropist Eli Broad and supermarket investor Ron Burkle. Any one of them could line up his own group to buy the entire company.

In any event, Tribune management does not have the last word. Any plan requires approval by the seven-member special committee of Tribune directors created Sept. 21.

Legal experts said the panel also could decide to take an active role in exploring options if it believed that management was leaving some stones unturned.

“They’ve got seven out of 11 votes, so in theory they can do what they want,” said Keith P. Bishop, an Irvine-based partner at law firm Buchalter Nemer and a former California Department of Corporations commissioner.

“These processes frequently start with people having one or two fixed agendas,” said a major Tribune shareholder who declined to speak for attribution. “But the long lore about what a special committee is about is responsible people doing responsible things.”

Not named to the committee were Tribune Chairman and Chief Executive Dennis J. FitzSimons and the three directors representing California’s Chandler family. The family, Tribune’s largest shareholder group, publicly attacked management’s strategy in June, disappointed with a stock price that has dropped 40% since 2004.

The committee announced last week that it had hired law firm Skadden, Arps, Slate, Meagher & Flom as its independent legal advisor. People in the investment-banking field expected Morgan Stanley to be chosen as a financial advisor.

Tribune is being advised by Citigroup Inc. and Merrill Lynch.

When Tribune announced the panel’s creation two weeks ago, FitzSimons said all value-creating options were on the table. Last week, he said management was “determining the best strategic alternatives for the company and its publishing and broadcast groups as a whole, before evaluating strategic alternatives for individual business units.”

Smith put a finer point on that view this week by saying that the individual units were “not for sale at this time.”

Smith was in Los Angeles on Thursday to force out Times Publisher Jeffrey M. Johnson and appoint Chicago Tribune Publisher David D. Hiller as his successor. Johnson had opposed management’s call for further newsroom cuts. Besides The Times and the Cubs, Tribune owns the Chicago Tribune, KTLA-TV and WGN-TV in Chicago, plus nine smaller newspapers and 23 other TV stations around the country.

One newspaper executive who has watched the unfolding events at Tribune said a sale of the whole company would be “a lot cleaner” than a piecemeal approach.

There is also the time factor: Tribune has set an ambitious deadline of year-end to present a strategic plan for the committee’s approval. The newspaper executive, who spoke on condition of anonymity, predicted that two or three consortiums of private-equity firms might emerge as bidders for Tribune. When Knight Ridder Inc., then the nation’s second-largest newspaper chain, put itself up for sale this year, it attracted only one bid, from McClatchy Co., which bought the company for about $4.5 billion.

A number of private-equity firms kicked the tires, but none submitted a bid for Knight Ridder. In a slowing economy and an environment in which Wall Street considers newspaper and broadcast advertising to be in irreversible decline, investment firms worry that they may be unable to resell such properties in their usual three- to five-year timeframe.

Tribune may be more attractive than Knight Ridder because of “the diversity of their assets,” the newspaper executive said. “There is more they can do in terms of selling things off.”

thomas.mulligan@latimes.com

james.rainey@latimes.com