Bloomberg News

Tribune Gets New Bid From Burkle, Broad, Topping Zell

March 30, 2007

(Corrects spelling of Burkle in second paragraph.)

Tribune Co. suitors Ron Burkle and Eli Broad sweetened their $8.2 billion offer for the owner of the Los Angeles Times, topping a bid by Sam Zell, a person familiar with the situation said.

Burkle and Broad, both billionaires from California, changed their $34 a share offer to include an employee stock ownership plan, said the person, who declined to be named because the discussions are confidential. Zell, a Chicago-based real-estate billionaire, made a similar bid at $33 a share.

The proposal complicates deliberations for directors of Chicago-based Tribune, who were close to accepting Zell's offer before a self-imposed deadline of March 31. The company, the owner of the Chicago Tribune and the Cubs baseball team, put itself up for sale six months ago, and had extended the deadline for offers to try to drum up demand. Zell had been the only bidder in contention.

``This indicates maybe more interest than Wall Street thought,'' said Edward Atorino, managing director of Benchmark Co. in New York, who has a ``buy'' rating on the shares. ``Suddenly the bids are getting more respectable. We'll see if Zell comes back with another bid. Maybe we'll get into the mid- $30s.''

Tribune spokesman Gary Weitman declined to comment, saying he can't confirm communications with the board. Terry Holt, Zell's spokeswoman, had no immediate comment. Broad spokeswoman Karen Denne declined to comment. Burkle spokesman Frank Quintero wasn't available.

The shares rose 47 cents to $32 in early trading on the New York Stock Exchange. They had gained 2.4 percent this year before today, compared with a 5.9 percent decline in the Standard & Poor's 500 Publishing and Printing Index.

Favoring Zell

Burkle, 54, and Broad, 73, made their offer after Tribune was poised to accept Zell's offer by the end of the week. Zell had pledged not to sell the company's television stations, newspapers and Internet businesses including CareerBuilder Inc.

``It's getting a little more interesting,'' said Ken Doctor, an analyst at Burlingame, California-based OutSell Inc., which consults with media companies. ``Now we are getting close'' to $35 a share.

Burkle and Broad changed the structure of their offer, which had initially relied on the company taking on $11 billion of debt, to be more like Zell's. Both would use the $1.76 billion in Tribune's employee pension to create an employee stock ownership program that would help finance the purchase.

``From an employee point of view, given the plight of the newspaper industry, putting all the pension funds into an ESOP is worrisome,'' Doctor said.

Tribune already has $4 billion in long-term debt and $9 billion in liabilities.

Zell offered to invest $300 million of his own money. Burkle and Broad are offering $500 million, the person said.

Chandler Pressure

Chief Executive Officer Dennis FitzSimons put the company up for sale under pressure from the Chandler family, which became a shareholder with the 2000 sale of Times Mirror Co. to Tribune. The family is now the largest investor.

Zell's interest in Tribune didn't emerge until February, after a deadline for bids had passed. Offers from Broad and Burkle, as well as the Chandlers had fallen short of the company's goal.

The board then began working on a ``self-help'' plan to spin off the TV stations and borrow money to pay a special dividend to shareholders. That plan lost momentum when Tribune's operating results deteriorated.

The offers had disappointed newspaper analysts, who said a $33-a-share price for Tribune would indicate that shares of most publishers were too high. The price would be about 9.2 times Tribune's 2006 earnings before interest, taxes, depreciation and amortization. That's lower than the average 9.8 times earnings that competitors' stocks are fetching, according to Alexia Quadrani, an analyst at Bear Stearns Cos.

Tribune said this month that newspaper advertising fell 5.1 percent in February to $233 million, led by a 13 percent drop in classifieds.

To contact the reporter on this story: Andy Fixmer in Los Angeles at

To contact the editor responsible for this story: Emma Moody at

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