Tribune Sold!
After 6 months of dating, and tabloid-worthy rumors and speculation not far behind the kind of paparazzi press coverage Paris Hilton and Lindsey Lohan get, Tribune Co. today announced it had settled on a buyer. The newspaper and media giant will be sold to billionaire real estate investor, and local Chicagoan, Sam Zell for approximately $8.2b.
The share price for the purchase will be $34, a premium of approximately 6% over last weeks trading but in line with pricing from September, when Tribune Co. announced it was for sale. That price is less than the average 9.8x multiple of Price to EBIDTA for Tribune’s public competitors.
The transaction will occur in two tender offers, the first for 126m shares will close in the second quarter. The second, for the remaining shares will close in the fourth quarter. The company will borrow the money in two $4.2b increments to buy back the stock. Merrill Lynch and JP Morgan will finance the deal.
Zell, who recently sold his Equity Office Properties Trust to Blackstone Group for $39b is personally investing $315m and will gain rights to a warrant entitling him to buy 40% of the company. To reduce the debt load which, including borrowing for the purchase price, will exceed $14b, Zell has announced a plan to sell the Chicago Cubs baseball team at the close of the current baseball season. It’s also a possibility that Zell will consider selling the LA Times property to Eli Broad and Ron Burkle, the LA-based investors who lost out in their bid for Tribune to Zell.
With Tribune a private company, Zell and his management team, will have a better situation to turn around the company than if it remained public.
Tribune is carrying a lot of debt at a time when cash flows are falling (the ad market for newspapers remains difficult). Moody’s, S&P and Fitch all have cautious “negative outlook” ratings on the company for now.
Though Zell is known for his success in real estate and his famed Real Estate Investment Trust, this deal will not be his first entry into media. In the 90s Zell was a co-purchaser of Jacor Communications, a radio company bought for approx. $80m and then sold in 1999 to Clear Channel for $4.4b (with Zell’s Zell/Chilmark Fund LP earning a profit of more than $1b on the deal).
In the event that the deal for some reason collapses before closing, the breakup fee agreed upon is $25m.
