FCC expected to lift barrier to Tribune deal
Federal regulators are poised to approve Tribune Co.'s $8.2-billion deal to go private by the end of the week, clearing the way for the transaction to close by Dec. 31.
Federal Communications Commission Chairman Kevin J. Martin removed the remaining regulatory obstacle to the deal Wednesday, proposing to exempt Tribune for two years from rules prohibiting ownership of a newspaper and a broadcast station in the same market. Tribune needs the waivers for its newspaper and TV combinations in Los Angeles, Chicago, New York, South Florida and Hartford, Conn.
The FCC is expected to approve the proposal by Friday, giving Tribune time to complete the transaction by the end of the year. The Chicago-based owner of The Times and KTLA-TV Channel 5 faces financial penalties if the deal, led by real estate magnate Sam Zell, closes after that.
“Based on Chairman Martin’s description of his proposal . . . we are pleased, and believe that, if we get the commission’s vote by Friday, we will be on track to close the Tribune transaction by year end,” Zell said in a written statement.
Amid a Wall Street rally Wednesday, Tribune’s stock shot up 10% to $30 on the news. But even that surge left the stock 12% below the $34 buyout price, indicating that some investors are doubtful the deal will close.
Tribune has said consistently that the financing is locked in place.
“The banks are still committed, and there is no indication of any change in the terms,” said a person close to the deal who spoke on condition of anonymity, citing the confidential nature of the negotiations. Even a delay of a few days could have pushed the process “down to the wire,” the person said, adding: “We need that vote on Friday.”
Tribune’s sale of the Chicago Cubs baseball team, meanwhile, could be delayed until next year, according to baseball Commissioner Bud Selig. The company hoped to seal a deal this year, with analysts estimating that bids might top $1 billion.
But Selig said Tribune would not release financial data on the team to potential buyers until January. “People haven’t even started bidding yet,” Selig told the Reuters Media Summit.
At the FCC, the proposed waivers would cover the company while Martin pushes a broader plan to ease the cross-ownership ban in the nation’s top 20 markets. Under that plan, Tribune could continue to own its newspapers and TV stations in Los Angeles, Chicago, New York and South Florida but would have to sell its paper or two TV stations in Hartford. The waivers apparently would allow Tribune to keep its Hartford properties for two years.
Martin would like to vote on the rule change Dec. 18. But Tribune executives had complained that waiting until then would prevent the deal from closing this year, because it needed 20 business days to be completed. Zell personally met with Martin this month to lobby for waivers.
If the FCC adopts Martin’s cross-ownership change, public-interest groups plan to sue the commission to block it.
Martin said the two-year Tribune waiver proposal would allow time for that to take place. The waivers are for either two years or for six months after any litigation ends, whichever is longer, he said.
“We should give people an opportunity to see how this all shakes out, and I would anticipate that would take quite some time,” Martin said. “I don’t think it’s appropriate to require companies to be divesting properties when there’s litigation going on.”
Tribune would be able to trigger the two-year waivers itself by going to court to appeal the FCC’s decision not to grant indefinite waivers. That would allow the company to get the waivers if the cross-ownership vote is delayed or fails.
A majority of the five-member commission still must approve the waivers, but Martin is almost certain to get a majority with the votes of his two Republican colleagues. Martin also would provide additional relief for Tribune in Chicago. His cross-ownership plan bars a company that owns a newspaper from owning more than one broadcast station in a market, and it also prohibits ownership of one of the four highest-rated TV stations. Under that plan, Tribune would be required to sell radio station WGN-AM (720) or WGN-TV Channel 9 in Chicago. The TV station wasn’t in the top four in October, but it has been as high as No. 2 this year.
Martin said his waiver plan would let Tribune keep those stations, which were grandfathered when the cross-ownership ban was enacted in 1975.
Public-interest groups, which oppose media consolidation, said they were disappointed that Martin was giving Tribune special treatment.
“It’s one thing to be given a reasonable time to dispose of properties at a fair market price. Two years goes far beyond that,” said Gene Kimmelman, a Consumers Union official.
The FCC’s two Democrats, Michael J. Copps and Jonathan S. Adelstein, are unlikely to vote for the waivers. But they have complained that Martin has been using the Tribune deal to push his cross-ownership change by the end of the year.
“Tribune, long a respected and influential institution of American journalism, has been used as a human shield to provide cover for broader rule changes, even at risk to the life of the hostage itself,” Adelstein said at an FCC meeting Tuesday.
Martin denied that Wednesday, saying he had been trying to find a way to allow the Tribune deal to close while sticking to recent FCC policy of not issuing indefinite waivers to the cross-ownership rule.
Staff writer Thomas S. Mulligan contributed to this report.