Billionaire Investors, Chandler, Makes a Bid for Tribune
There is a new bidding war brewing, and at the epicenter of this new war is Tribune Co. The parties to the new bidding war are the Chandler family, one of its largest shareholders, and a group led by two billionaires from Los Angeles. The two parties have submitted rival bids for the Tribune Co., a company that has been priced at a small premium. The small premium was a reflection of the future of the newspaper industry.
The two bids came in after a number of private equity firms took a look at the state of affairs at the Tribune and then came up with bids having a nominal premium. Some of these firms did not return with a bid. Tribune shares jumped by 2.1 percent, or $0.47, during early trading at the New York Stock Exchange, and now currently stands at $30.81, as of Wednesday.
Of the two parties who made the bid, the Chandler family offered a bid that valued the company at $31.70 a share, a premium of 4.7 percent over the closing price on Wednesday. The value of the Chandler family bid stood at $7.6 billion. The Chandlers are the largest shareholders at the Tribune, and currently own the Los Angeles Times as well as the Chicago Cubs Baseball Team.
The second bid came from a group of investors led by Eli Broad and Ron Burkle, two billionaires from Los Angeles. They made a higher offer than the one made by the Chandler family, offering a 12 percent premium of $34 per share. The total value of their bid stood at $8.2 billion, a source close to the bids said.
The Burkle and Broad bid consisted of a $27 dividend and an equity value of $7 per share. They have offered to pump in $500 million in cash into the newspaper, getting to own 30 percent of the newspaper and broadcasting group in the process, the source said. If the deal came through, Burkle and Broad would take up positions in the board, while the current management would continue to run the affairs of the company.
This deal would work better for Tribune than the Chandler bid, as there would be no actual change of control at the ground level, and the newspaper would continue to be traded publicly.
Burkle is a grocery magnate who owns Yucaipa, a private equity firm. He has also invested in different companies, including Wild Oats Marketing Inc. Broad is the founder of KB Home, a home builder, as well as SunAmerica Inc., a financial services firm that is currently a part of American International Group.
Neither of the bids matched the actual worth of the company, according to analysts, though they said it showed that there was still interest in the Tribune. Some analysts even felt that there might not be a sale at all, finally. In the words of Edward Atorino, an analyst at Benchmark Co., “There may be some room for negotiation here to squeeze out another buck or two per share,” he said.
