Tribune stock up on eve of vote

Tribune Co.'s stock jumped 5 percent Monday on the eve of a shareholder meeting on the $8.2 billion deal to take the media conglomerate private, but an expected "yes" vote won't erase the questions still surrounding the transaction.

Standard & Poor's underscored concerns by cutting its rating on the Chicago company's debt, citing a deterioration in operating performance and cash flow since the deal was announced nearly five months ago. The rating agency lowered Tribune debt -- already carrying junk-bond status -- to "B+" from "BB-" and said it would reduce it further once the buyout led by real-estate billionaire Sam Zell is complete.

That didn't deter investors from sending Tribune's badly lagging stock on one of its biggest upswings in months. Shares rose $1.35 to $27.02 following the latest statement by Tribune that the deal remains on track.

Approval by shareholders today is considered a foregone conclusion because they will be voting to accept $34 per share when the going price is 20.5 percent below that. Bigger challenges remain before the deal can close, however: getting waivers from government rules banning same-market ownership of television and newspapers and surviving the wild swings in market conditions.

Zell's plan is to gain control in a highly leveraged buyout that will take the company private under an employee stock ownership plan.

"The numbers still don't work for this deal," said analyst Dave Novosel of the bond research firm Gimme Credit, citing high costs, unstable credit markets and deteriorating operational performance.

Zell declined comment.