This is a transaction that is designed to go to Zell. When it was first proposed to take the company private under Sam Zell’s leadership, the stock was about four dollars below the share advertised as the privatization price. But in the interim, the arrow on the stock price has been heading in the other direction. Those numbers are 30 dollars at the time of the announcement, an announced price-per-share of 34 dollars for the acquisition, and an actual stock price, as of close of business last week, less than 26 dollars. Articles at key publications with Times in their names on both coasts likened the situation to a betting proposition with few takers. The Los Angeles Times did note that the reduced price has attracted some investors willing to accept the odds, including Stark Offshore Management, Perry Corporation and Renaissance Technologies. But it also notes that the company will have significant debt, over 10B, and the New York Times article says that number could reach 13B. Shareholders will be looking voting on the 8.2B deal today in Chicago. The bottom line is that although Zell and Tribune executives remain confident that the deal will go through as planned, there seems to be no shortage of Wall Street observers who believe otherwise. According to LAT, the board is expected to allow the deal to go forward, putting the ball in the FCC’s court, which will have to approve the transfer of 23 television stations and one radio station, as well as determine the fate of five television/newspaper cross-ownership situations that rely on waivers and/or grandfathering for their existence.
RBR observation: NYT noted that part of the purchase price will come from the sale of MLB’s Chicago Cubs, and that further cash could be realized by liquidating the company’s television assets. The problem with that scenario is that the company will be left pinning all of its future hopes on the newspaper part of the business, precisely the portion that is under the most stress.