Tribune Gets 45 Million Shares in Buyback

Despite raucous boardroom dissent, Tribune Co. said Tuesday that it had completed its tender offer and expected to purchase 45 million of its shares at $32.50 apiece, the top price set by the company.

The response from investors fell short of the maximum 53 million shares Tribune said it would buy under the offer. The repurchase was carried out amid intense opposition from California’s Chandler family, which had a 12% stake and is expected to emerge as Tribune’s largest shareholder after the tender offer and subsequent buybacks .

Completing the tender offer will only increase tensions between the media company and the Chandlers, who in 2000 sold control of the Los Angeles Times and its parent, Times Mirror Co., to Tribune. The family vowed Tuesday to continue pressuring Tribune management to make strategic changes, and are expected to try to enlist major investors and equity funds as allies.

“We, like many other non-tendering stockholders, believe there is greater value to be realized through prompt and meaningful strategic action,” the Chandlers said in a statement. “As the largest stockholder in Tribune ... we will continue our efforts to bring about positive change for the benefit of all Tribune stockholders,”

Chicago-based Tribune said it would next acquire, as planned, 10 million shares from its largest stockholder, the McCormick Tribune Foundation, which is controlled by Tribune management. That purchase, set for July 12, also would be priced at $32.50 a share. It would make the Chandler family the company’s largest shareholder, with a stake of more than 14%.

The company said it would then acquire as many as 20 million additional Tribune shares on the open market, starting as soon as July 12.

That would bring the total buyback to 75 million shares, or 25% of Tribune’s 300 million shares outstanding.

It also would raise the Chandlers’ stake to about 16%, assuming they do not sell any of their stock.

The Chandlers, who control three Tribune board seats, had opposed the $2-billion debt-financed share buyback, arguing that the company instead should spin off its broadcast division or put itself up for sale.

With the tender offer over, Tribune appeared to shrug off the Chandler challenge.

“Now, our priority is to improve operating performance through a combination of top-line growth initiatives and additional cost savings,” Tribune Chief Executive Dennis J. FitzSimons said in a statement Tuesday. “We’ll also continue to move forward on dispositions of non-core assets.”

Tribune owns The Times, the Chicago Tribune, Newsday in New York and eight other newspapers.

The company also owns two dozen television stations, including KTLA-TV Channel 5 in Los Angeles, and the Chicago Cubs baseball team.

Tribune previously announced plans to slash $200 million in expenses over the next two years.

The savings are expected to come through back-office efficiencies such as centralized accounting systems, the sharing of news-gathering resources among its newspapers and TV stations, and through employee attrition and layoffs.

Tribune recently announced the sale of TV stations in Atlanta and Albany, N.Y., neither of which Tribune considered essential.

The buyback is the first step in Tribune management’s announced plan to boost the company’s lagging share price. Traders seemed to give the results a thumbs-up Tuesday, as Tribune shares gained $1.57, or 5%, to $32.47.

But the Chandler family, which holds nearly 37 million shares, has been outspoken in its opposition.

Two weeks ago, the Chandlers went public with a stinging critique of management, branding Tribune’s 2000 acquisition of Times Mirror a failure.

The 45 million shares that were tendered, or pledged, to Tribune during the four-week offer period fell 8 million short of the maximum that the company had offered to buy, but experts took that as a bullish sign. Many shareholders, they said, apparently didn’t want to exit at $32.50 because they thought the stock might keep rising.

The tender offer was made via a “Dutch auction” in which shareholders were asked to name a price from $28 to $32.50 a share at which they would be willing to sell. In theory, the company would have selected the lowest price at which it would purchase all of its target 53 million shares, but only 45 million were tendered, including at least some at the top of the range.

“The market likes what it sees so far,” said analyst John Miller of Chicago-based Ariel Capital Management, which has fattened its Tribune position in recent months and now owns slightly more than 5% of the stock.

Ariel publicly supported the buyback but declined to participate because it believes that the shares have an “intrinsic value” of $44 to $45 apiece, Miller said.