Zell confident Tribune plan is sound
Tribune Co. shareholders approved an $8.2 billion buyout Tuesday led by billionaire Sam Zell and must now wait to see if his purchase of the second-largest U.S. newspaper publisher can be completed as planned.
Zell's $34-a-share bid was 21 percent higher than Tribune's closing stock price Tuesday. About 97 percent of shareholders voted for the purchase, Chief Executive Officer Dennis FitzSimons said at a meeting at Tribune's headquarters in Chicago.
"This is the first of key milestones that we think the company needs to complete in the second half of the year in order to get the deal completed," said Mike Simonton, an analyst at Fitch Ratings in Chicago, who rates Tribune bonds "highly speculative" or lower.
Tribune needs approval from the U.S. Federal Communications Commission and must comply with loan covenants so banks will lend the $4 billion needed to complete the deal. A 93-percent drop in profit in the first-half has led investors to question whether Zell will close the deal -- or should.
"Despite the recent upheaval in the credit markets, my view of Tribune as an investment has not changed," Zell said Tuesday in a statement issued by Tribune.
Simonton and Jake Newman of CreditSights Inc. say if the buyout goes through, Tribune may not be able to pay the $1.08 billion of annual interest on its $14 billion debt. The company, which owns the Los Angeles Times and 23 TV stations, is awaiting FCC waivers allowing the prospective buyers to own newspapers and TV stations in the same market, the last major hurdle before the transaction closes.
Tribune shares rose 96 cents, or 3.6 percent, to $27.98 in New York Stock Exchange composite trading. They have declined 9.1 percent this year.
"Sam Zell is a capable guy and I think he's going to make it happen," Phil Rosanski, who owns about 1,000 Tribune shares, said after the meeting. "There are some risks in the deal, but $34 a share is a cheap price for the assets of the Tribune."
Under the deal announced April 2, Tribune is buying back almost all of its shares. After that, an employee stock ownership plan will own the company. The company expects the deal to close by year-end.
A delay in FCC approval may push the deal into next year. The International Brotherhood of Teamsters, which says it represents 2,000 of Tribune's 21,000 employees, filed comments with the FCC urging the agency "to make sure local and diverse views are protected before granting consent," the union said Tuesday in a statement. The union is seeking employee representation on the company's board.