Speculation Over Possible Asset Sale Lifts Tribune Shares, Endangers Stock Buyback

Tribune Co.’s $2-billion share buyback plan appeared threatened Thursday as the company’s stock price edged higher amid speculation that a larger restructuring lies ahead.

Tribune shares rose for a second day after reports that the Chandler family of Los Angeles, a major shareholder, opposes the Chicago media company’s plan to repurchase as much as 25% of its stock. The shares gained $1.27 to $31.58, approaching the maximum of $32.50 that Tribune said it would be willing to pay under the current tender offer.

The boardroom schism “could discourage some investors from tendering in the hope of realizing a higher price due to more aggressive asset sales” or a sale of the entire company, JPMorgan analyst Frederick Searby wrote to clients.

Tribune said it would press on with the “Dutch auction” tender offer, in which shareholders say what price they want the company to pay them for their shares. Tribune would then pick the lowest price per share that would result in 53 million shares being tendered. The offer expires June 26.

If fewer than 53 million shares were tendered, Tribune would buy what shares it can within the $28-to-$32.50 price range. It also could extend the offer period and raise the price it would be willing to pay.

One analyst, Paul Ginocchio of Deutsche Bank, said that if not enough shares were tendered, Tribune directors would have to consider breaking up the company, which owns 11 newspapers including the Los Angeles Times, 26 television stations including KTLA Channel 5 in Los Angeles, the Chicago Cubs baseball team and a 31% stake in the Food Network.

The Chandlers own 12% of Tribune’s stock, mostly through two investment partnerships that date to when the Chandlers arranged the sale of Los Angeles Times parent Times Mirror Co. to Tribune in 2000. As a result of that sale, the Chandlers have three representatives on the Tribune board: Jeff Chandler, William Stinehart Jr. and Roger Goodan. The three recently asked Tribune to make public their vote against the refinancing plan, which was approved by the board, 8 to 3.

The Chandlers haven’t publicly said what they want, but people familiar with their thinking said they were interested in Tribune spinning off or selling its broadcast division, which some analysts say could boost the value of its stock by as much as $10 a share.

In its solicitation to buy back shares, the company said it “is currently evaluating certain strategic alternatives relating to its television, radio broadcasting and entertainment businesses,” including a spinoff or sale.

Industry executives said they believed Tribune had been exploring a possible sale of the television business for as much as $6 billion in recent weeks or at least gauging potential interest for a takeover in case Tribune first splits that business off.

A sale of the television business could set the stage for selling Tribune’s 11 newspapers or more likely taking them private, analysts said.

Tribune Chief Executive Dennis FitzSimons recently told associates that he was reluctant to take as much debt as would be needed to take private control of all of Tribune. But a newspaper-only company would have a much lower price tag.

Pure newspaper companies also have been trading at a discount to other media companies, making a takeover play even cheaper. Some industry analysts have said in recent months that private ownership is the best answer for newspapers. That’s because papers are more profitable than most businesses but show little sales growth, discouraging many stock buyers.

For now, FitzSimons has said the buyback is one step toward increasing value for public shareholders, along with cost cutting and sales growth in television, newspapers and such Internet businesses as CareerBuilder.

Tribune and the Chandlers declined to comment Thursday. Other members of the sprawling Chandler family said they had not been kept apprised of the negotiations between their relatives and Tribune.

A key issue for the family’s leaders is how to wind down the two investment partnerships, which can be dissolved without tax penalty this fall. The family and Tribune disagree about how to do that.

As things stand, the Chandlers would have to pay stiff capital gains taxes if they sell their shares back to the company or in the open market. The partnerships were created in 1997 and 1999 to minimize taxes, and in the sale of Times Mirror, the Chandlers’ Times Mirror stock in the partnerships was exchanged tax-free for Tribune shares.

As they were in 2000, the Chandlers are being advised by former Times Mirror Chief Financial Officer Tom Unterman, now managing partner of Rustic Canyon Partners, a venture capital and private equity firm based in Santa Monica.

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Times staff writers Sallie Hofmeister and Meg James contributed to this report.