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Chandlers divided over bid for Tribune
Lackluster bidding for Tribune Co., parent of the Los Angeles Times, has sparked a debate within the newspaper's founding family about whether to launch its own bid for the company, a family member said Monday.
If Tribune ultimately is going to be sold in pieces, some members of the Chandler family reason that if there is money to be made doing that they might as well be the ones to make it, the family member said.
Others believe in restoring The Times to family control, but the clan remains divided on how to proceed, said the family member, who asked not to be named because the Chandlers have not been commenting on the continuing auction of Tribune.
FOR THE RECORD:
Bidding for Tribune: A Business article Tuesday about the Chandler family's possible interest in purchasing Tribune Co. said the family had formed two partnerships with Tribune. The partnerships were formed by the Chandler family and Times Mirror Co.; Tribune inherited stakes in them when it bought Times Mirror in 2000. —
"There is a great opportunity after these bids came in low for the Chandler trusts to get back into the newspaper business, specifically around the Los Angeles Times property," the family member said.
The board of the Chandler trusts, composed of eight family members, continues to hold a different view: "The sale of the entire company is the best outcome for all stockholders," said a person familiar with their thinking.
The Chandlers' public criticism of Tribune management in June pushed the Chicago-based company into the auction that is going on now.
The family's ownership stake has risen from about 12% earlier this year to 20% in part because of the restructuring of complicated partnerships it had formed with Tribune. The family also holds three of the 11 seats on the company's board.
So far, four preliminary bids have come from private equity companies, acting individually or in groups. In addition, one bid has come from Los Angeles billionaires Eli Broad and Ron Burkle, and another from Gannett Co., the nation's largest newspaper company, people familiar with the process said.
Los Angeles billionaire and music mogul David Geffen also has expressed interest in buying The Times but is not believed to have made a bid.
In addition, Maurice R. "Hank" Greenberg, former chairman of insurance giant American International Group Inc., is considering a bid for Tribune or other newspaper companies, the New York Times reported Monday.
The Chandler family member came forward partly in response to a column that Harry B. Chandler, son of the late former Times Publisher Otis Chandler, wrote in Sunday's edition of the newspaper. In the column, Harry Chandler claimed that most of the extended family had no interest in the future of The Times.
"To say there is no emotional desire to be a part of the newspaper by the extended family is just plain wrong," said the other Chandler, who has been following the contest for Tribune closely.
This person said that buying back The Times was far from a settled point within the large and far-flung family. The two Chandler trusts that hold the Tribune stock and other investments have about 170 beneficiaries. Other family members believe that it is best to sell and get out of the flagging media business as soon as possible.
The family's net worth is unclear, although the Chandler trusts' stake in Tribune alone is worth nearly $1.6 billion.
Industry experts believe that the increased interest in Tribune means that a sale or breakup of the company is near certain. But none of the nonbinding bids received to date has been much above where the stock has traded in recent weeks, people familiar with the bidding said.
Tribune shares closed at $32.46 on Monday, up 43 cents. The recent closing peak was $33.99 on Sept. 22, the day after Tribune announced that it would explore a range of options, including selling all or parts of the company. Besides The Times, Tribune owns the Chicago Tribune, Newsday in New York, the Chicago Cubs baseball club, KTLA-TV Channel 5, eight other newspapers and about two dozen TV stations and a significant stake in the Food Network.
Representatives of Gannett, which owns USA Today, about 90 other daily newspapers and 23 TV stations, met with Tribune management last week and examined some of the company's private financial data, according to a Tribune executive familiar with Gannett's actions, who asked not to be named because he is not authorized to speak for the company.
Gannett is a partner with Tribune and McClatchy Co. in CareerBuilder.com, the leading Internet job-search site. A Tribune purchase would give Gannett a controlling stake in the business, which some analysts say is worth more than $1 billion.
The biggest obstacle to Gannett's buying all of Tribune might be federal regulations barring the concentration of media ownership.
Federal Communications Commission rules limit companies from owning TV stations that cover more than 39% of the country. Currently, Tribune stations cover about 28% of the country, and Gannett, which focuses on smaller markets, covers 18%. Combined, the stations would reach about 44% of the country, but a combined company could probably sell off enough stations to conform to the rules, one analyst said.
A potentially tougher problem is cross-ownership of newspapers and TV stations in the same market. Gannett would inherit Tribune's cross-ownership situations in Los Angeles, Chicago, New York, Miami and Hartford, Conn., and could run into further problems in Philadelphia and Indianapolis, where Gannett newspapers would be added to Tribune TV outlets.
Tribune has been hoping for a change in the regulations, but faces a license expiration Dec. 1 for KTLA and expiration for New York's WPIX next spring.
Gannett was unlikely to buy all of Tribune because of the regulatory headaches, but might covet the company's growing and highly profitable Florida newspapers and some of its TV stations, said one rival newspaper executive, who asked not to be identified for fear of souring his relationship with Tribune executives.
Although insurance magnate Greenberg is said to be only considering a bid, he is not unfamiliar to other players in the drama surrounding Tribune. He worked closely with Broad in the late 1990s when AIG acquired Broad's SunAmerica Inc., a retirement-savings specialist, for $18.4 billion.
Experts — including some Tribune insiders — believe that a sale of the company is all but inevitable.
"I think it is sold, period," a Tribune executive said Monday. The executive requested anonymity because he had not been authorized to speak.
It may be well into next year before a transaction is completed and it could take an unexpected form, but "something will happen," said Eric McKissack, chief investment officer of Chicago-based Channing Capital Management, which owns about 600,000 Tribune shares.
If the company rejected all offers and said it would go forward without any major transformation, the stock could fall sharply.
"With all the speculation, the stock is trading at $32.50 or so," the Tribune executive said. "I think that it goes down like a rock as soon as this process is over if a deal does not get done."
Risk arbitragers, who place bets on takeover targets such as Tribune, aren't sure that there is much more value to be had, said Keith M. Moore of the New York arbitrage firm Kellner DiLeo & Co. He noted that Tribune shares had not traded very actively recently and that the stock had not been especially volatile. Those may be signs that arbitragers are limiting their involvement.
"Arbs" tend to dump a stock when a deal falls through, but Moore said their cautiousness regarding Tribune could mean there would be no giant sell-off but only a modest slide of $2 or $3 a share.
Times staff writers Meg James in Los Angeles and James Puzzanghera in Washington contributed to this report.