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This morning, the two top executives of Tribune Co. (TRB) made their first public remarks since the company's second-largest shareholder noisily registered dissent over strategy last week and called for a breakup of the media giant.
Onstage in Midtown Manhattan at the Mid-Year Media Review conference, Chairman and Chief Executive Officer Dennis FitzSimons nodded to Donald Grenesko, Tribune's senior vice-president of finance and administration, strode to the podium, and addressed a crowd of financial analysts and reporters: "I'm Dennis FitzSimons, chairman-CEO of Tribune. So what's new with you?"
WHO'S FOR SALE? What's new with Tribune, according to Grenesko and FitzSimons, are details on the $200 million in cost cuts the company promised on May 30. While Tribune has sold two TV stations, one in Atlanta and one in Albany, N.Y., as part of a promised $500 million divestiture of certain "non-core" assets, FitzSimons said today that future sales could include broadcasting and publishing businesses, as well as certain real estate holdings. Tribune's publishing segment includes its newspapers, Chicago Magazine, and the Tribune Media Services syndicate. (Would-be moguls in Los Angeles can relax: A sale of the company's Los Angeles Times is not immediately pending, since that would net far more than $500 million.)
FitzSimons offered no details as to which properties may go up for sale. But the company's stated intent is to focus even more on large markets and on the potential synergies between broadcasting and newspapers, though the latter initiative remains largely unrealized (see BusinessWeek.com, 6/19/06, "Dog-Bites-Man Thinking").
That may imply the company's TV stations in Grand Rapids, Mich., and Harrisburg, Pa., or its newspapers in Hampton Roads, Va., and Allentown, Pa., might turn into candidates for sale.
MONUMENTAL DEBT. Grenesko also pointed to upcoming newsroom cutbacks among the company's 12 newspapers, saying that one way the company would achieve its cost savings involves centralizing some "content" across its newspapers, especially with regard to national and foreign news. He said this would involve "staff reductions through attrition and position eliminations."
Tribune's troubles came to a head earlier this month in the aftermath of the company's announcement it would take on upward of $2 billion in debt to buy back up to 25% of its common shares outstanding. The Chandler family, which sold its Times Mirror chain to the Tribune in 2000, objected forcefully.
Now holding three board seats and controlling 12% of the company's stock through two trusts, the Chandlers had a representative for the trusts file a hotly worded letter with the Securities and Exchange Commission on June 13. The letter cited what it called numerous strategic failures on Tribune's part and called for the company to separate its newspaper and TV businesses and explore other options for the company.
'DAMAGED' PERFORMANCE Tribune's seven independent directors, many of whom are based in Tribune's hometown of Chicago, in turn released a letter that strongly supported the buyback and management.
Some of the intra-board tension was evident in FitzSimons'’s remarks. One friction point between Tribune executives and the Chandlers is over two trusts that they jointly own (separate from the two trusts through which the Chandlers own their Tribune stock). The Chandlers and Tribune management have held discussions about restructuring these trusts, so far without any resolution. Speaking to this point, FitzSimons said potentially “a tax liability could recur if these are restructured” and that “Tribune had absorbed a $1 billion tax bill inherited”—he appeared to stress this last word—in the Times Mirror deal. This tax bill, he said, “certainly damaged our performance” relative to its peers.
TUNE IN NEXT WEEK. "The company has no intention of assuming any additional tax liability," FitzSimons concluded. But in a possible concession to the Chandlers, he also reiterated that the share buyback plan "does not preclude pursuing other value-creation options in the future." He added, "This disagreement is not so much about strategy as it is about economics and tax risk."
FitzSimons said the company was in a quiet period owing to the share buyback and could not take questions from the audience. He similarly rebuffed reporters' inquiries after the company's 20-minute-long presentations. He concluded the presentation by saying Tribune would report the results of its share buyback early next week.
The Tribune’s largest shareholders now are company-controlled trusts, in the name of the company’s founding family, the McCormicks. In a grace note of irony, the share buybacks likely will make the Chandlers the company’s largest single shareholder.
Fine is BusinessWeek's MediaCentric columnist and Fine On Media blogger
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