Sam Zell isn?t called the “grave dancer” for nothing.
Poised to assume the chairmanship of a $4.3 billion company for only $315 million ? $225 million as a subordinated, interest-bearing loan ? billionaire Chicago turnaround specialist Zell?s selection as Tribune Co.?s savior may be more about continuity than cash.
Even well-heeled Los Angeles bidders Ron Burkle and Eli Broad were willing to invest almost double Zell?s ante, according to the Los Angeles Times, and said in a complaint to Tribune Co. ? owner of 11 dailies and 23 broadcasting interests ? that they were not given the same information as Zell.
One of those dailies, The Sun, is an acquisition target of the Baltimore Media Group, area investors seeking to return the vintage paper to local control. Another is the Los Angeles Times, which Burkle and Broad wanted to bring home.
So why was Zell, who will have no stock exposure in the new employee-owned company when it presumably launches in 2008 but will have a 15-year warrant for a 40 percent stake at $500 million-$600 million, chosen?
“Anybody probably could have [configured a similar deal]; probably only Sam Zell will keep the company together,” said John Morton, newspaper analyst at the University of Maryland.
“Only Sam Zell … more or less promised that he intends to keep the company whole,” Morton added. “And I think that was important, certainly to management.”
Morton also saw an old money-new money angle to Zell?s deal.
Citing the Chandler family, former Los Angeles Times owners who became testy Tribune stakeholders, forcing the company auction, Morton said, “Sam Zell is a Chicagoan … and, let me tell you, the old Tribune Company has had its fill with people from Southern California, including the Chandlers.”
According to the company?s proxy statement, however, a sell-off of properties is not ruled out ? and could occur if the leveraged $8 billion deal?s income projections disappoint.
Noting that specific Tribune holdings are cited as collateral in the deal debt agreements, Moody?s Vice President John Puchalla resisted naming names. “Whether there is a direct guarantee from The Sun or any other property … the first claim on all cash flow … is with the banks.”
All of which keeps Baltimore Media Group spokesman Ted Venetoulis optimistic. “To our knowledge [The Sun] is not a core asset … and it?s liable to be spun off.”
