As we predicted, the Tribune Company tender offer for 126 million shares at 34 bucks each was waaaaay oversubscribed. The company says 224 million were tendered, which is 92% of all of the Tribune shares that exist. So, most of the shareholders who tendered will get to sell only about half of their shares – unless and until the FCC approves the license transfers and accompanying waivers of the crossownership rule so Sam Zell and a new Employee Stock Ownership Plan (ESOP) can complete their buyout of the public shareholders. For now, Tribune says those tenders of odd lots, less than 100 shares, will be accepted and all others will be pro rated. Payment for the shares accepted will be made no late than June 5th.
Meanwhile, Tribune CEO Dennis FitzSimons has sent staffers a memo to clear up what he says are "misperceptions" about the going private deal. "Many people seem to think that Sam Zell has already acquired or will acquire Tribune Company later this year-that is not accurate. What is accurate is that Sam will sponsor, through his investment in Tribune, a going-private transaction. When the transaction closes, expected in the fourth quarter of 2007, Tribune will be owned entirely by an Employee Stock Ownership Plan (ESOP). The ESOP will own 56.5 million shares of Tribune stock, which will be 100% of the outstanding shares at that time. Last month, Sam made an initial investment of 250 million in Tribune. Upon closing, his investment will increase to 315 million and he'll become chairman of Tribune's board of directors. I will remain as CEO and as a director. Following the close, Sam also will hold a warrant to acquire 40% of Tribune's common stock at any time within the next 15 years," FitzSimons explained.
The CEO also defended the role of the new ESOP's trustee, GreatBanc Trust Company, in representing the new employee investors. "On behalf of the new Tribune ESOP and its participants, GreatBanc negotiated for and acquired its shares of Tribune stock at 28, which compares favorably to the 34 price paid by Sam Zell to purchase his shares," he noted.
Dear Fellow Employee:
It's been a busy few weeks. Sandwiched around our annual shareholders' meeting, I met with employees at Newsday, Chicago Tribune, WGN Radio and TV, the Los Angeles Times and KTLA, and with all of our TV general managers at the CW fall preview meeting for advertisers last week in New York. Scott Smith held meetings at our newspapers in Florida and at Newsday . In addition, John Reardon and John Vitanovic have so far visited 11 of our television stations.
At each meeting we discussed the ESOP/Zell transaction and fielded questions from employees. It was quite apparent that some misperceptions are still out there, so I want to take this opportunity to clarify a couple of issues more broadly.
*Sam Zell is acquiring Tribune Company.
Many people seem to think that Sam Zell has already acquired or will acquire Tribune Company later this year-that is not accurate. What is accurate is that Sam will sponsor, through his investment in Tribune, a going-private transaction. When the transaction closes, expected in the fourth quarter of 2007, Tribune will be owned entirely by an Employee Stock Ownership Plan (ESOP). T he ESOP will own 56.5 million shares of Tribune stock, which will be 100 percent of the outstanding shares at that time.
Last month, Sam made an initial investment of $250 million in Tribune. Upon closing, his investment will increase to $315 million and he'll become chairman of Tribune's board of directors. I will remain as CEO and as a director. Following the close, Sam also will hold a warrant to acquire 40 percent of Tribune's common stock at any time within the next 15 years.
Full details about Tribune's ownership structure are posted on the employee information website, available through TribLink and http://tribuneathome.com.
*The role of the ESOP Trustee.
During every stage of the transaction announced on April 2, employees were represented in the negotiations by GreatBanc Trust Company, one of the most experienced ESOP trustees in the country. GreatBanc acts as the ESOP Trustee for major U.S. corporations, including ABN/AMRO/LaSalle, Citigroup, Hartmarx, Rite Aid, Sherwin-Williams, Provident Bank and Wells Fargo & Company.
On behalf of the new Tribune ESOP and its participants, GreatBanc negotiated for and acquired its shares of Tribune stock at $28, which compares favorably to the $34 price paid by Sam Zell to purchase his shares.
As the ESOP trustee, GreatBanc will vote all Tribune shares owned by the ESOP on all matters submitted to a shareholder vote, such as the annual election of directors and ratification of the company's auditor. GreatBanc will not sit on the board, which is consistent with the role of trustees at other ESOP-owned corporations.
In the event of a future merger or sale of all or substantially all of the company's assets, employees will direct the ESOP trustee on how to vote the shares which have been allocated to their ESOP accounts.
If you have additional questions on this or other topics, I again encourage you to visit the employee information website. If your question is not addressed there, use the "Ask a Question" feature on the website and you'll receive a prompt response.
Later this year you will receive additional communication about our new benefit plans, including the ESOP. Please remember that the first allocation to employees from both the cash balance plan and the ESOP will be made in January 2009 for the 2008 calendar year.
Today we announced the preliminary results of our stock tender offer that closed yesterday. Our press release with full details is available on TribLink and www.tribune.com, and we'll issue another release with final results next week. The tender was clearly successful, and we're now very close to completing the first stage of our going-private transaction.
As you know, regulatory approval will be one of the final steps in the process. On that front we received some good news last Friday when a bipartisan group of 14 members of Illinois' congressional delegation wrote to FCC Chairman Kevin Martin, urging him to act quickly on issues related to our transaction.
In the meantime, it's important that we focus on business. Right now the revenue situation at both our newspapers and television stations is difficult. Interactive growth is good but not enough to make up for the decline in print. We expect trends to improve in the second half of the year, especially in the television group. Having seen recent presentations for the CW network's fall line-up last week, we are optimistic. Along with the debut of "Family Guy" and "Two-and-a-Half Men" on many of our stations, the fall TV season looks promising.
Finally, a quick word about the "legal language" included below – it is a necessary inclusion at this time due to the upcoming shareholder meeting on the ESOP/Zell transaction.
Thanks for all you're doing as we look forward to an important new chapter in Tribune's history.
TVBR observation: This notion of "going private," while it clearly has some advantages, is not as easy as it might look. The Wall Street Journal reported Friday that Tribune's sale of more than seven billion in new debt was a tough sell and the company had to pay higher rates than expected, with some of the debt coming due in only two years. Meanwhile, the company is lobbying hard in Washington to build support for the crossownership waivers it needs to maintain its newspaper/broadcast combinations as it changes ownership. Until it succees on that front, phase two of the buyout can't go to closing and Tribune will remain in its current state of being about half owned by Zell and the ESOP and about half by its previous shareholders, including such dissatisfied shareholders as the Chandler family.