Tribune investor could be pivotal

John W. Rogers Jr., the founder, chairman and chief investment officer of mutual fund company Ariel Capital Management, is an avowed admirer of investing superstar Warren E. Buffett, who once described his average holding period for a stock as “forever.”

Patience is the prime virtue at Ariel, whose company slogan is “slow and steady” and whose “deep-value” investing style involves seeking out-of-favor companies in out-of-favor industries, buying stock at a bargain price and holding on until the rest of the market figures it out. Rogers, 48, had patience drilled into him on the basketball court, as team captain at Princeton University under legendary coach Pete Carril, who took a highly disciplined, grind-it-out approach to the game.

“It is uncanny how his investing style mirrored Pete Carril’s offense,” said Alexander Wolff, a writer at Sports Illustrated who was a year ahead of Rogers at Princeton. He recalled that Rogers “had a campus-wide rep as a precocious stock picker” even then.

But patience has its limits, and Ariel’s patience has been tested by one of its largest holdings, Tribune Co., parent of the Los Angeles Times, the Chicago Tribune and other newspapers; broadcast properties including KTLA-TV Channel 5; and the Chicago Cubs baseball franchise.

Tribune’s stock has lost nearly half its value since the 2000 acquisition of The Times’ former parent, Times Mirror Co. The anemic performance has helped drag down Ariel’s recent results, in turn causing some big Ariel investors to pull their money out. As of last week, the flagship Ariel Fund ranked 308th out of 321 funds in its peer group, with a one-year total return of 10.3%, as compared with a peer average of 17.03%, according to fund tracker Lipper Inc.

Although Tribune is by no means the worst laggard in his portfolio, Rogers may be in a unique position to do something about that investment.

Rogers’ office on the 29th floor of the lakefront Aon Center here is a five-minute walk from Tribune’s headquarters in the iconic Tribune Tower downtown. In his business and civic roles, the lifelong Chicagoan has ties with Tribune management and its board. Ariel also has more than a casual connection to David Geffen, one of three Los Angeles billionaires who has voiced an interest in buying The Times.

In a recent interview, Rogers acknowledged that he has been working behind the scenes to keep information flowing.

Tribune is under intense pressure to boost its stock price -- the same kind of pressure experienced by Knight Ridder Inc., which was the nation’s second-largest newspaper chain before it was sold and broken up this year. Shareholder discontent at Tribune burst into public view in June when the Chandler family of Los Angeles, which controls a nearly 20% stake and three of 11 seats on its board, chastised management for a “failed strategy” and called for aggressive action, including putting the company up for sale.

Tribune Chairman and Chief Executive Dennis J. FitzSimons and the board have since taken some conciliatory steps, including restructuring two Tribune-Chandler partnerships last month in a way that removed them as an impediment to more radical moves, such as a spinoff of the company’s 25 TV stations or the sale of The Times, the Cubs or other properties. The board also named a special committee of seven independent directors -- excluding FitzSimons and the three Chandler representatives -- to oversee management’s campaign to pump more life into the stock.

FitzSimons, however, has said he wants to devise strategies for the whole company before considering sales of individual assets, specifically The Times. People who know the members of the management team believe that they would be loath to part with The Times, the Cubs or cable TV network Superstation WGN. The Chandlers have said little since their public outburst in June, but a minimalist, stay-the-course approach probably wouldn’t satisfy them.

If Tribune’s destiny came down to a proxy vote, FitzSimons could count on the management-controlled McCormick Tribune Foundation, which owns about 11% of the company’s stock, the second-biggest stake after the Chandlers’.

But other big shareholders haven’t shown their hands, including Rogers, a talented card player who has competed in the World Series of Poker in Las Vegas.

Ariel holds 14.9 million shares, or 6%, of Tribune stock, just behind Baltimore-based T. Rowe Price (15.6 million shares) as the company’s biggest institutional owner. But where Tribune is concerned, Ariel is better connected.

For example, Ariel does its banking with Northern Trust Corp., whose chairman, William A. Osborn, heads the Tribune board’s special committee. Both Osborn and Rogers are active in the Chicago Urban League and in the Chicago Symphony Orchestra, of which Osborn is chairman and Rogers a life trustee.

As a director of McDonald’s Corp., Rogers serves with Enrique Hernandez Jr., chairman of Pasadena-based Inter-Con Security Systems Inc. and another member of the Tribune committee. A third committee member, former Quaker Oats Co. CEO Robert S. Morrison, sits with Rogers on the board of insurance giant Aon Corp.

Ariel’s connections don’t stop at the Tribune boardroom. Rogers’ protegee and a fellow Princeton alum, Ariel President Mellody L. Hobson, 37, is a director of DreamWorks Animation SKG Inc., along with Geffen, the studio’s co-founder. When Hobson visits Los Angeles, she sometimes stays at Geffen’s house.

Rogers called Hobson’s ties with Geffen “an interesting coincidence” but cautioned against reading too much into it.

“As a major shareholder in a company like Tribune, we get calls from private equity firms and wealthy individuals,” Rogers said. “It’s part of our job to engage in conversations.”

Although he shrugged off the notion that Ariel has been a conduit between Geffen or other interested parties and Tribune, Rogers said: “As we gain insight and information as to how people view the company, it’s important to bring those questions up” to management. “We might say, ‘Have you thought of this? Have you thought of that? Here’s what one person thinks such-and-such an asset is worth.’ ”

In its public statements to date, Ariel has sounded a pro-management theme.

Ariel Vice Chairman Charles K. Bobrinskoy, 47, who was a longtime investment banker at Salomon Bros. before joining Ariel, issued an approving statement last month when the board revamped the Chandler partnerships and created the special committee: “Ariel has continuously expressed confidence that the strong board and management of Tribune would take steps to realize the intrinsic value of the company.”

Bobrinskoy, who grew up with Rogers in the city’s Hyde Park section and worked with him as a peanut vendor at White Sox games, said several months ago that Tribune could be worth as much as $46 a share. The company’s shares closed Friday at $32.31, down 60 cents.

Today, with Tribune potentially facing an auction, Ariel has backed away from naming a target price. Rogers said only that the stock “is selling at a significant discount.”

Though he has been circumspect about prescribing how to achieve maximum value, Rogers departs from FitzSimons by focusing on the assets that could be sold individually.

“Look at Food Network and CareerBuilder and the Cubs,” he said. “There’s a robust interest in individual entities.”

CareerBuilder.com, 42.5% owned by Tribune, has emerged as the leading Internet job-search site and the most coveted of the company’s digital properties. The Cubs, though barely profitable and lackluster on the field, could command $500 million in a sale, some analysts estimate.

The Cubs and The Times exemplify “trophy properties” that might attract community-spirited or ego-driven buyers who would pay more than what the usual cash-flow analysis might imply.

“Tribune has more trophies than most companies,” Rogers said.

Ariel has seldom turned confrontational with its portfolio companies. It was more in character for Rogers to declare himself “extremely disappointed” last August when Career Education Corp., one of Ariel’s worst-performing stocks and the subject of a federal investigation, came out with subpar quarterly earnings that again bashed it on Wall Street.

“One of the things we discuss with our own board is how activist to be,” Rogers said. Because of Ariel’s “very constructive, positive dialogue” with FitzSimons and his management team, he has not felt “any inclination to be negative.”

“I don’t think he’s there to rock the boat or upset management,” Jeff Tjornehoj, a senior research analyst at Lipper, said of Rogers. “If he thought they were heading in a really wrong direction, he’d just get out.”

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thomas.mulligan@latimes.com