No decision on auction of Tribune

CHICAGO -- Tribune Co. directors met Tuesday with no resolution of the company’s months-long auction.

The lack of acceptable buyout offers appeared to be pushing the company toward a recapitalization without outside investors, according to several people familiar with the process. Such a transaction, they said, probably would involve borrowing heavily to pay shareholders a large dividend and spinning off Tribune’s TV broadcasting division.

Chicago-based Tribune is the corporate parent of the Los Angeles Times, the Chicago Tribune, KTLA-TV Channel 5 and the Chicago Cubs baseball team.

“The word is that Tribune is now focused on doing a deal internally,” a newspaper executive who has spoken to Tribune’s management said. “They have given up any hope of getting a price they think they should from the outside and will do an internal restructuring.”

The source declined to be named because his conversations with Tribune were supposed to remain confidential.

In a statement issued after Tribune’s regularly scheduled board meeting Tuesday, director William A. Osborn, head of the special committee overseeing the strategic review, reiterated that the board “expects to make a decision on a course of action and have an announcement before the end of the first quarter.”

The auction that ended Jan. 17 resulted in just three offers, none of them involving a complete buyout and none -- in Wall Street’s view -- offering much if any premium above where Tribune stock had been trading. Tribune shares closed at $30.40 on Tuesday, up 11 cents.

Other anticipated bidders, especially private equity firms, were said to be anxious about the future of the newspaper business. The newspaper executive said potential bidders “were especially thrown off base” in December when McClatchy Co. of Sacramento sold its largest paper, the Minneapolis Star Tribune, for less than half of what it had paid for the paper in 1998.

The Chandler family of Los Angeles, Tribune’s largest stockholders with 20% of the company, proposed a split-up that would leave the family with Tribune’s 11 newspapers and would give the remaining shareholders the 23-station broadcasting division, plus $19.30 a share in cash.

Los Angeles billionaires Ron Burkle and Eli Broad offered to invest $500 million in cash and have Tribune take out bank loans to provide shareholders with a $27-per-share dividend. The company would remain publicly traded, but the two investors would emerge with 34% ownership.

Several Wall Street analysts scoffed at the deal, saying that Tribune could just as easily do the deal on its own without giving up any ownership.

A third bidder, the private equity firm Carlyle Group, was interested only in the broadcast division, the Cubs and the Food Network, which is one-third owned by Tribune.

Carlyle and Tribune could not come to an agreement, in particular, on the value of the baseball team and the Food Network, said one individual familiar with the proposed deal. And the investment firm’s taxable cash offer could not compete with the media company’s proposal of a tax-free television spinoff.

“If it’s about minimizing taxes, a cash-free spinoff will always beat a cash offer,” the source said.

Tribune has not rejected any of the bids, according to people who declined to be identified because they had not been authorized to speak. Thus, it is still possible that a sweetened offer from one of the bidders could develop, but probably not until the specifics of a Tribune internal recapitalization plan were known.

“Since they aren’t sure there is really a competitive offer against them, there’s not much incentive to do more,” an advisor to one of the bidders said. “That would be like bidding against yourself.”

thomas.mulligan@latimes.com

james.rainey@latimes.com