Tribune Co. faces a difficult decision on its future after the only offers the media company received for its assets by an already-extended deadline fell short of expectations.
The largest bid was disclosed Thursday -- an estimated $7.6 billion proposal by its largest shareholder, the Chandler family, to buy the company and spin off its broadcast division to shareholders.
Wall Street analysts said Tribune's directors are unlikely to accept that less-than-hoped-for offer, as well as a second proposal from Southern California billionaires Eli Broad and Ron Burkle that calls for a recapitalization rather than a buyout. To fund a big one-time cash payout to shareholders, that one would pile significantly more debt, and risk, on Tribune at a time when the newspaper industry's prospects are cloudy at best.
"We think both proposals will likely be rejected by Tribune's board because they are not at a premium to current stock price," said Lehman Brothers analyst Craig Huber, a view widely shared.
A third proposal reportedly was submitted for Tribune's television stations only, by an unidentified private-equity firm. But further details about that bid, reported by The Wall Street Journal, were not immediately known.
That leaves the company's direction shrouded in uncertainty and management still under pressure to do something, through a sale or otherwise, to keep the company's stock from slumping again. The shares lost almost half of their value between the end of 2003 and last summer, when the Chandler family and others began a campaign for change.
Not doing anything would be a disappointing outcome for shareholders in the nation's third-biggest newspaper company, which owns 11 dailies, 23 TV stations, the Chicago Cubs baseball team and sizable stakes in the Food Network and the CareerBuilder online classified advertising venture.
Two other options for Tribune were making the rounds on Wall Street on Thursday.
One is a long speculated-about spinoff of its TV assets. Also seen as possible is a management-led proposal to either buy back more shares or divest other non-core assets, such as possibly the Food Network stake or the Cubs.
Tribune spokesman Gary Weitman said only that the board committee appointed last September to oversee the process will review the proposals and make a recommendation to the full board of directors. The timeframe for a decision remains sometime during the first quarter.
He also declined comment on reports the board is meeting this weekend to discuss its options.
Despite all the skepticism about the offers, investors pushed up Tribune's lagging stock modestly on Thursday in hopes some kind of deal is closer. Shares rose 56 cents, or 1.9%, to $30.90 on the New York Stock Exchange, evidently on notions that one of the bids could be sweetened in negotiations.
"Ultimately, we think either the bids will have to change over the next several weeks or management will continue operating Tribune as is," John Janedis of Wachovia Securities wrote in a note to investors.
The offer by the Chandler Trusts, who own 20% of Tribune stock, was disclosed in a filing with the Securities and Exchange Commission. They said they would own 51% of Tribune after the deal closed and the remaining 49% would be held by two private equity firms, whose names were not disclosed.
The Chandlers sold Times Mirror, owner of the Los Angeles Times, to Tribune in 2000 for $6.5 billion.
The trusts are offering $19.30 a share in cash as well as stock in a spinoff, Tribune Broadcasting, which would include the company's broadcasting and entertainment operations. They estimated the combined value to shareholders would be $31.70 a share, 4.5% above Tribune's closing price Wednesday.
The Chandlers maintained that their offer, which expires Jan. 31, is about an 18% premium over what the company would have been trading at absent takeover speculation. They cited a recent Merrill Lynch report estimating that Tribune's unaffected stock price would be $27 a share.
A person familiar with the matter told The Associated Press that Broad and Burkle had submitted a proposal to sponsor a recapitalization worth more than $34 a share.
Under that plan, Broad and Burkle would inject $500 million cash into the company and arrange a debt package which would pay out much of the company's value in the form of a special dividend payment to shareholders of $27 a share. Shareholders would retain a majority stake of Tribune, while Broad and Burkle would get about a 30% interest and seats on the board.
The person spoke on condition of not being identified because the terms of the proposal have not been released publicly.
The Broad-Burkle plan would bring a quicker resolution than the Chandlers', which is estimated to take six months to complete, but would increase the company's debt load by about $6.5 billion. Citigroup analyst William Bird said it would "saddle the company with arguably an uncomfortably high level of debt."