Sam Zell was speaking in LA this week, so of course the Q&A session got around to the hometown newspaper. Several rich locals have expressed and interest in buying the Los Angeles Times, but Zell says he has no plans to sell – unless someone really wants to pay a strong price. Zell has insisted all along that keeping together the broadcast-newspaper crossownership combos of Tribune Company is key to growing the company going forward. So far, since he became an investor and a member of the board, all that Tribune Company has put up for sale is the Chicago Cubs and its studio complex in LA. Zell insisted this week that he has no idea which bidder is going to end up with the Cubs, except, “it ain’t gonna be me.”
Based on the stock price spread, Wall Street has grown pessimistic about Tribune Company being able to complete phase two of its plan to go private, with Zell and an Employee Stock Ownership Plan as the owners. Tribune management has insisted that its financing commitments are solid for the buyout, which is still awaiting needed regulatory approvals. A recent report by Lehman Brothers analyst Craig Huber, however, put the chance of closing the buyout at only 50-50. Thus, the stock has been trading well below the 34 bucks per share buyout price.
RBR observation: Although traders are worried about Tribune being able to hold the financing together in the current credit climate, we think the bigger problem is getting FCC approval of the crossownership waivers – and particularly getting them in a timely manner. Despite general Democratic Party opposition to media consolidation and waivers for big media companies, Tribune was able to line up Capitol Hill support, particularly from the Illinois delegation, from both sides of the isle. But as the election season draws nearer, it will be increasingly difficult to get the FCC to go out on a limb and grant a pile of waivers for one company. It doesn’t help that Commissioner Michael Copps (D) recently expressed public concerns about granting waivers to Tribune. Copps appears to be frustrated that he is powerless to do anything about News Corporation acquiring Dow Jones & Company, a media merger he clearly detests, so that could make him more likely to wield the power he does have – against the Tribune-Zell deal.