Zell buys Tribune, faces challenge ahead

The deal of the buyout of Tribune finally closed with the billionaire investor, Sam Zell buying America’s second largest newspaper publisher for $8.2 billion.

Sam Zell, a real estate billionaire, is known as "The Grave Dancer" for his shrewd investments and for turning losing business into profitable ones.

Tribune owns nine daily newspapers along with 23 television stations and Cubs. Reports say that he second-biggest U.S. newspaper publisher after Gannett Co. lost more than two-thirds of its market value in three years before it declared in September 2006 that it is ready for a sale.

The deal almost took eight and a half months for its completion and Zell who will be the new Chairman of the company succeeding Dennis FitzSimons, is extremely positive about the opportunities in this field.

"I'm sick and tired of everybody talking about and commiserating about the end of newspapers. They ain't over," said Zell. "They represent an extraordinary opportunity, and we're going to take advantage of it." Some people also think that he might also become the CEO of the company.

Zell will investment $315 million in Tribune and he will own warrants to buy about 40 percent of the company, which will be formally owned by an employee stock ownership plan.

The stock prices rose by 91 cents to reach $33.98 at the New York Stock Exchange. Analysts said they think the investors were waiting for the confirmation of the deal before investing.

Zell’s first move to reduce the debts will be to sell the Chicago Cubs baseball team, Wrigley Field stadium the Chicago-based Comcast sports channel, which are targeted to be sold in the first half of 2008. These were amongst his primary conditions before the deal.

FitzSimons served the company for 25 years out of which for the last five years he held the post of CEO. It was during his reign that Tribune suffered major losses and it reached a position at which selling the company was the only option left.

"What I think is going to happen is the transformation will continue, and I believe and clearly Sam believes, that there is tremendous value in these assets going forward," he said.

No matter how good Zell be in doing business, he faces a tough task ahead as the whole newspaper industry is undergoing a transition phase.

Another potential problem that might trouble him in the future is that the four banks: JP Morgan Chase & Co., Merrill Lynch & Co., Citigroup Inc. and Bank of America Corp. that are backing this deal, might go for reconsidering the deal as the state of Tribune is not too good at present.

"The whole newspaper industry has realized that the world is changing around them," said James Goss, an analyst with Barrington Research in Chicago. `It's clear that the changes are more dramatic than anybody was really envisioning and the business model revamp is going to be much greater than people were thinking.''

The major strengths of Tribune is the recent performance of the TV group, cable superstation WGN, and the company's sizable stakes in the Food Network and the CareerBuilder online classified advertising venture.