Three billionaires hoping to buy the Los Angeles Times expressed their interest in separate letters this month to the paper's owner, Tribune Co. But each was told The Times was not for sale -- at least for now, according to several people who have seen the letters.
Since a schism in June on the Tribune board put the company's future into question, reports have circulated that philanthropist Eli Broad, music and movie mogul David Geffen and former supermarket magnate Ron Burkle would like to buy the newspaper.
A purchase by any of the three Los Angeles billionaires would put the newspaper under local ownership for the first time since 2000, when the Chandler family agreed to sell the paper's then-owner, Times Mirror Co., to Chicago-based Tribune. Relations between the newsroom in Los Angeles and the corporate office have grown increasingly strained since then, especially as Tribune has squeezed the budget and cut staff in response to declining revenue.
"It would be in the best interests of Tribune and the best interests of Los Angeles if a sale was completed," former Mayor Richard Riordan said.
Tribune's directors considered the three letters at a July 19 board meeting. Tribune Chairman and Chief Executive Dennis J. FitzSimons has since replied in writing to each of the prospective suitors, informing them that the board "unanimously asked me to advise you that at this time we are not prepared to discuss the possible transaction described in your letter," according to someone who saw the correspondence.
"If our perspective changes we will contact you," the FitzSimons letter concluded.
One person close to the situation, who spoke on condition of anonymity because the matter was confidential, said he considered FitzSimons' reply more hospitable than Tribune's previous posture, which was simply that The Times was not for sale.
A sale of The Times, arguably Tribune's single most valuable asset, would probably not occur except as part of a breakup or outright sale of Tribune, according to investors and analysts who follow the company. The presence of willing buyers for a number of Tribune properties, however, could increase pressure on the company to consider a breakup.
Sources said investors in Baltimore and New York had begun exploring the possible purchase of two other Tribune newspapers: the Baltimore Sun and Newsday.
Frank G. Zarb, former head of Nasdaq Stock Market and a New York-based managing partner of private equity firm Hellman & Friedman, is interested in Newsday, the dominant paper on New York's Long Island, according to two people with knowledge of the situation. Zarb did not return a call Friday seeking comment.
In Baltimore, Robert C. Embry Jr., president of the Abell Foundation, which has ties to the former owners of the Sun, said Friday that although he had publicly stated his interest in the paper, he had not written to Tribune's board.
Tribune shareholders have been leaning on management to boost its stock price, which is languishing at less than half its 1999 high of $60.88. As of Friday, the stock market valued all of Tribune's shares at almost $9 billion, which a number of investors believe is far less than the company's parts could bring in a breakup.
Some analysts believe that The Times could be sold on its own for as much as $3 billion. Tribune owns two dozen television stations, including KTLA Channel 5, as well as the Chicago Cubs baseball team and newspapers including the Chicago Tribune.
FitzSimons and other Tribune executives declined to be interviewed for this article.
"We never comment about speculation regarding board business," company spokesman Gary Weitman said.
The board's unanimity in the July 19 meeting is significant because it came six weeks after a boardroom battle between FitzSimons and California's Chandler family, whose trusts control about 15% of Tribune shares -- the largest single stake. Chandler representatives hold three of the company's 11 board seats.
Descendants of the family that founded The Times, the Chandlers last month publicly attacked management's plan to repurchase 25% of Tribune's stock and said the company should instead spin off its TV stations or put the company up for auction. With the Chandler directors opposed, the board voted 8 to 3 to go ahead with the stock buyback.
Through a spokesman, the Chandlers also declined to comment for this article.
After the flurry of news reports surrounding the Chandlers' broadside, public rancor quieted down. Behind the scenes, however, according to people involved, private equity firms and individuals interested in Tribune newspapers or other assets began discussing possible deals. The Chandlers started trying to rally support among key Tribune shareholders for a breakup.
After Broad, Burkle and Geffen had gone public with their interest, investment firm Goldman, Sachs & Co., representing the Chandlers, approached the three individually and told them that if their interest was sincere they should put it in writing to FitzSimons and Tribune's lead outside director, William A. Osborn, chairman of Northern Trust Corp., according to a person involved in the discussions.
Goldman Sachs declined to comment, although spokesman Peter Rose confirmed that the Chandler trusts had retained the firm "to evaluate their options."
Tribune stock, after rallying to a 2006 high of $32.60 on July 11 after the boardroom spat became public, has lately been slumping again. The shares rose 81 cents Friday to $29.53; it was their first gain after declining in 12 straight trading sessions.
On July 13, Tribune reported a 62% drop in second-quarter profit and accelerating circulation declines at its papers. In a conference call with analysts that day, FitzSimons made a conciliatory remark about the dissidents on his board, saying: "We look forward to moving constructively with the Chandlers. They are important shareholders."
The three Los Angeles billionaires have discussed various strategies for acquiring the paper -- both individually or as partners. They have continued to talk enthusiastically about the prospects in private meetings, despite Tribune's cool response.
"They feel that with the Chandlers, the biggest stockholder, in opposition to current [Tribune] management and with the stock price going down that the trend is irreversible," said one interested party, who has discussed the situation with the three. "They think there will be a sale."
Those close to the private talks about the newspaper said that Geffen seemed particularly enthusiastic about the idea of owning the newspaper. They also depicted the DreamWorks SKG co-founder as the most likely of the trio to want to purchase The Times on his own.
Geffen, 63, made a fortune buying and selling record companies in the 1970s and 1980s before launching DreamWorks in 1994 with Steven Spielberg and Jeffrey Katzenberg. Geffen, worth $4.4 billion, according to Forbes magazine, has told people that he envisions The Times as a national newspaper.
Broad, 73, and Geffen are said to have a chilly relationship.
Geffen and Burkle declined to comment for this article.
Broad would not discuss the specifics of his interactions with Tribune but reiterated his earlier stance: "I believe in local ownership of the newspaper and that the city and the community would be best served by local ownership."
He added that he thought "something is going to happen" because at "Tribune Co. they are going to have to unlock values" of the company's assets.
Broad, whose real estate and insurance fortune Forbes has put at $5.9 billion, has said he would like to use his Broad Foundation to buy The Times in combination with other local institutions. He was mentioned as a likely buyer of the Los Angeles Dodgers when News Corp. put the team on the market several years ago, but the team went to Frank McCourt of Boston.
Burkle, 53, who has discussed teaming up with Broad in a purchase of The Times, made an unsuccessful bid for 12 Knight Ridder Corp. newspapers when that company was broken up this year. He said last month that "the chance for the L.A. Times to be locally owned again is an opportunity not to be missed."
Burkle multiplied his fortune by buying, merging and selling supermarket chains including Ralphs Grocery Co. and Food4Less. Forbes has estimated his wealth at $2.3 billion.
A stumbling block to selling The Times or other longtime Tribune assets is the tax implications. But an institutional investor who has analyzed the company said it would be possible to sell a minority but controlling interest in the newspaper to an individual while spinning off the remainder to existing Tribune shareholders. Such a transaction, called a sponsored spinoff, wouldn't trigger a huge capital-gains tax liability for Tribune the way an ordinary sale would, this person said.
As the drama unfolds, large Tribune shareholders may play a pivotal role. Chicago-based Ariel Capital, the third-largest holder with a 6% stake, has been supportive of management, calling the stock buyback "a good first step." Ariel has a connection to Geffen in that the investment firm's president, Mellody Hobson, serves with him on the board of DreamWorks Animation SKG. Hobson, in an interview Friday, said that the coincidence would have no effect on a potential sale of The Times because her role at Ariel is to run every part of the company except its investment portfolio.
Investment decisions, she said, are overseen by Ariel's founder and chairman, John W. Rogers Jr.