Shareholders approve Tribune sale
Shareholders approve Tribune sale
Chuck Berman, Chicago Tribune, August 21, 2007
By James P. Miller
Copyright © 2007, Chicago Tribune
11:47 AM CDT, August 21, 2007
Tribune Co. shareholders this morning formally approved the company's $8.2 billion plan to be taken private, with 97 percent of the shares voted cast in favor of the $34-a-share buyout led by a group that includes Chicago real-estate mogul Sam Zell.
The Chicago media holding company had tentatively agreed to the complex plan earlier this year, and the first phase, in which about half the company's shares were bought back at the $34 price, has already been completed.
Before the company can consummate the second, final leg of the deal however, shareholders had to provide their formal approval. That was the purpose of the special stockholder meeting hosted today in the neo-Gothic building that houses both the Chicago Tribune and Tribune Co.'s corporate headquarters.
Shareholder approval has largely been treated as a given, in view of the fact that the newspaper industry's fortunes have continued to decline since Zell's group first proferred the bid Tribune directors approved. Tribune's earnings continue to erode, under pressure from the Internet and other forces pinching profits at all newspapers.
Because of those worsening newspaper-industry conditions and because credit has grown costlier and harder to find since the deal was unveiled, Wall Street is far from convinced the deal will go through, at least at the $34 price offered.
From that perspective, the ringing endorsement the stockholders provided this morning is less important than the questions of whether the funding stays in place.
Tribune stock last week fell below $26 a share, providing evidence that the stock market thinks that a lower price will emerge for the second half of the buyout or that the proposed buyout could be derailed.
Those fears were apparent at the meeting, where shareholders asked Tribune officials questions about how likely the deal was to proceed as planned.
Chief Executive Dennis FitzSimons said the buyout accord has a "tightly written" clause governing any pullout by the financing group, a claused s based on adverse developments in the newspaper industry as a whole, rather than at Tribune.
Because of that, FitzSimons told the audience at Tuesday's brief session, "we don't anticipate, nor do our financing sources anticipate, an invocation of that clause."
FitzSimons reiterated that Tribune expects the deal to close in the fourth quarter, pending approval by federal regulators, and he added that Tribune's isn't planning to shed any newspaper assets as part of the buyout.
Tribune shares, which strengthened Monday, were up an additional 3.2 percent late Tuesday morning, trading on the New York Stock Exchange up 87 cents, at $27.89, in an indication that investor confidence in a deal is strengthening.
Tribune has borrowed $7 billion to finance the first step of the transaction, and buy back shares; it had to commit to repaying $1.5 billion of that borrowing within two years in order to secure the loan.
Now that shareholders have cleared the deal, Tribune needs to borrow an additional $4.2 billion to effect the transaction, which gains significant tax advantages because it makes use of an employee stock ownership plan.
jpmiller@tribune.com
Chuck Berman, Chicago Tribune, August 21, 2007
By James P. Miller
Copyright © 2007, Chicago Tribune
11:47 AM CDT, August 21, 2007
Tribune Co. shareholders this morning formally approved the company's $8.2 billion plan to be taken private, with 97 percent of the shares voted cast in favor of the $34-a-share buyout led by a group that includes Chicago real-estate mogul Sam Zell.
The Chicago media holding company had tentatively agreed to the complex plan earlier this year, and the first phase, in which about half the company's shares were bought back at the $34 price, has already been completed.
Before the company can consummate the second, final leg of the deal however, shareholders had to provide their formal approval. That was the purpose of the special stockholder meeting hosted today in the neo-Gothic building that houses both the Chicago Tribune and Tribune Co.'s corporate headquarters.
Shareholder approval has largely been treated as a given, in view of the fact that the newspaper industry's fortunes have continued to decline since Zell's group first proferred the bid Tribune directors approved. Tribune's earnings continue to erode, under pressure from the Internet and other forces pinching profits at all newspapers.
Because of those worsening newspaper-industry conditions and because credit has grown costlier and harder to find since the deal was unveiled, Wall Street is far from convinced the deal will go through, at least at the $34 price offered.
From that perspective, the ringing endorsement the stockholders provided this morning is less important than the questions of whether the funding stays in place.
Tribune stock last week fell below $26 a share, providing evidence that the stock market thinks that a lower price will emerge for the second half of the buyout or that the proposed buyout could be derailed.
Those fears were apparent at the meeting, where shareholders asked Tribune officials questions about how likely the deal was to proceed as planned.
Chief Executive Dennis FitzSimons said the buyout accord has a "tightly written" clause governing any pullout by the financing group, a claused s based on adverse developments in the newspaper industry as a whole, rather than at Tribune.
Because of that, FitzSimons told the audience at Tuesday's brief session, "we don't anticipate, nor do our financing sources anticipate, an invocation of that clause."
FitzSimons reiterated that Tribune expects the deal to close in the fourth quarter, pending approval by federal regulators, and he added that Tribune's isn't planning to shed any newspaper assets as part of the buyout.
Tribune shares, which strengthened Monday, were up an additional 3.2 percent late Tuesday morning, trading on the New York Stock Exchange up 87 cents, at $27.89, in an indication that investor confidence in a deal is strengthening.
Tribune has borrowed $7 billion to finance the first step of the transaction, and buy back shares; it had to commit to repaying $1.5 billion of that borrowing within two years in order to secure the loan.
Now that shareholders have cleared the deal, Tribune needs to borrow an additional $4.2 billion to effect the transaction, which gains significant tax advantages because it makes use of an employee stock ownership plan.
jpmiller@tribune.com
posted by Carlos T Mock at 9:49 AM
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