Tribune draws unexciting bids for firm, seeks offers for units

Times Staff Writer

After receiving a handful of unimpressive bids for the company, Tribune Co. is soliciting offers for individual properties in its portfolio, which include the Los Angeles Times, KTLA-TV Channel 5 and the Chicago Cubs.

A deadline Friday for nonbinding preliminary offers resulted in bids valued at about the company’s current share price, two people familiar with the process said Wednesday. That led Tribune’s investment bankers to begin calling people who had expressed interest in bidding for particular assets to say such offers were now welcome.

In Los Angeles, entertainment mogul David Geffen, former home builder Eli Broad and former supermarket magnate Ron Burkle have said they are interested in buying The Times.

Local groups and individuals have expressed interest in acquiring other Tribune papers such as the Baltimore Sun, the Hartford Courant and Newsday, which is published on New York’s Long Island.


Under pressure from shareholders because of its sagging share price, Chicago-based Tribune announced in late September that it would consider a sale or breakup of the company. The company at first put off potential buyers of individual assets, saying it would accept offers only for Tribune as a whole.

Apparently no media companies came forward in the initial bidding. Nonbinding bids were made by several private equity firms, including Bain Capital, Carlyle Group, a partnership of Texas Pacific Group and Thomas H. Lee Partners, and an alliance of Providence Equity Partners, Madison Dearborn Partners and Apollo Partners.

News of the tepid bidding sent Tribune’s stock down late Wednesday. The shares fell 71 cents to $32.62 in regular trading, then continued to slide in after-hours activity to $32.

“No one is going to be happy with this news. It’s not good for Tribune. It’s not good for the shareholders,” said a businessman interested in buying one of the Tribune papers. The businessman asked not to be named, fearing he would alienate a special committee of independent directors designated to decide the company’s fate.


Yet some analysts believe that Tribune could be worth more sold piecemeal. They put the value of Tribune’s 11 daily newspapers, 25 TV stations and other holdings -- which include stakes in cable television’s Food Network and the online job site -- at as much as $46 a share.

Tribune faces the same challenges confronting many media companies. The circulation of its newspapers has been sliding, and many advertisers have been shifting their spending to the Internet.

Newspaper websites have recorded strong growth and arguably reach more readers than their publications’ print editions. But online advertisements sell for considerably less than print ads and provide only about 5% of newspaper companies’ total revenue.

The Times on Monday reported its weekday circulation in the six months that ended Sept. 30 was down 8% from the same period last year. Executives at the paper took some solace in the fact that most of the decline came from eliminating free and low-cost deliveries to hotels and schools.

An executive with one of the private equity bidders said investors questioned whether the newspaper industry’s woes were reversible. The private equity firms also believe that Tribune is already tightly managed, making it difficult to find cost savings that investment firms usually rely on to profit from their acquisitions.

The request for bids on individual Tribune businesses does not mean that offers for the whole company will be rejected, the sources said, but rather that the company felt obligated to assess its value by seeing how much the units might fetch.

Substantial offers for the units could prompt the private equity firms to raise their bids for the entire company, said a private equity executive who asked not to be named because he had not been authorized to speak about the deal.

“If you are an investment banker representing management right now you say, ‘Well, let’s see if any of these offers are for real’ ” said the executive. “Maybe if they are, then private equity recalculates value, knowing there is a real buyer out there” for pieces of the company.


The three Los Angeles businessmen who had expressed interest in The Times have remained silent during the initial bidding for Tribune. None of them responded to requests for comment Wednesday.

Geffen has told associates for more than a year that he is interested in purchasing the paper by himself for about $2 billion, a deal he has said he could complete in cash. Broad and Burkle have discussed putting together a consortium of local businesspeople to return The Times to local ownership.

Those who have spoken to all three said that Geffen -- a former record company owner and co-founder of the DreamWorks SKG studio -- appears to have the greatest passion for the newspaper business. He has told others that he would be willing to accept lower profit margins to avoid editorial staff cuts and would be willing to pay handsomely to lure star journalists.