Papers, Web firms need ‘a new deal,’ Zell says
Sam Zell, who agreed to a takeover this week of Tribune Co., came to the heart of Silicon Valley on Thursday evening and said there needed to be “a new deal and new formulas” between newspapers and Internet companies.
Journalists produce the news that search engines such as Yahoo Inc. and Google Inc. seamlessly and freely make available to anyone with a computer, Zell said during a presentation on corporate governance at Stanford University. “If all the newspapers in America did not allow Google to steal their content for nothing, what would Google do, and how profitable would Google be?” the Chicago real estate maverick mused.
His answer: Not very.
The title of Zell’s talk was “ ‘Make Me an Offer’: Sam Zell and the $39-Billion Buyout of Equity Office Properties.” Zell sold the real estate firm he built into the nation’s largest collection of office buildings after a heated bidding war in February.
He told his audience of Stanford Law School students that he liked serving on boards that were “pretty noisy,” and where the directors tended to display “insufficient regard for the chairman.”
“The more times I hear no one has ever done this before, the more likely I am to endorse the idea,” he said.
But at a reception before and a Q&A; session after his talk, most students wanted to talk about the Tribune deal. The Chicago company’s holdings include the Los Angeles Times, KTLA-TV Channel 5 and the Chicago Cubs baseball team.
Zell tried to steer clear of the subject but couldn’t resist tackling some questions. He said he had been in the news business for less than a week, so he wasn’t a genius at it yet. Zell has made a fortune worth an estimated $4.5 billion by turning around distressed assets.
Told that many people didn’t think that newspapers were a good business because of declining circulation and falling ad revenues, he fired back: “A lot of people didn’t think the railcar business was a good investment. I made a quarter-billion dollars. A lot of people didn’t think container leasing was a good investment. I made a half-billion. Should I go on?”
“The Tribune deal, no matter what happens, is not going to change my life,” Zell said. “But it’s a fascinating challenge. And it’s even more of a challenge when I see other people haven’t been successful in figuring it out.”
He declined to talk to reporters, saying he was there for the students.
Separately Thursday, Tribune said in a regulatory filing that it had set aside a cash bonus pool of $6.5 million for top executives once the deal is complete. Chief Executive Dennis J. FitzSimons chose not to participate in the bonus pool. The company said the bonus pool would take the place of restricted stock units that had been authorized.
The disclosures were made in a filing with the Securities and Exchange Commission late Thursday that provided details of Tribune’s $8.2-billion deal with Zell that was announced Monday. The deal will take the Chicago-based media company private and convert it to an employee-owned structure using an employee stock ownership plan, which functions something like a profit-sharing system.
Zell is contributing $315 million in financing to the deal and will become the company’s chairman. He will also gain the right to purchase 40% of the company’s stock later.
In the filing, Tribune said that 38 top executives involved in consummating the deal -- except FitzSimons -- would share the bonus pool once the transaction was complete. Donald Grenesko, the company’s finance chief, would receive $600,000; Scott Smith, head of the newspaper division, $400,000; and broadcasting division chief John E. Reardon would get $350,000.
As part of the deal, the three board members representing the Chandler family -- the company’s largest shareholder -- would depart the board. Tribune purchased Times Mirror Co. from the Chandler family in 2000 for about $8 billion.
The Chandler family called for a shake-up in the company last year, setting in motion the process that resulted in the privatization plan proposed by Zell.