A simmering dispute broke into open warfare as the Chandler family branded Tribune management a failure and called for a breakup or outright sale of the company by year’s end.
The Chandlers are Tribune’s second-largest shareholder after selling Times Mirror Co., including the flagship Los Angeles Times, to Chicago-based Trib six years ago. But the combined company’s financials and its stock price have languished.
“Management’s operational response (yet another round of cost cutting) is subject to serious execution risk and offers little to spur revenue growth and invigorate the newspaper franchises,” the Chandlers wrote in a vitriolic letter filed Wednesday with the Securities and Exchange Commission. It was signed by family member William Stinehart Jr.
They slammed Trib for not investing in new businesses.
Letter calls for Trib to separate the newspaper biz from TV, suggesting a tax-free spinoff with a private equity firm taking a piece of the broadcast side. It acknowledged a split is complicated by family trusts that control the shares on both the Chandler and the Tribune side.
Letter says the Chandlers have already suggested various ways to unwind the trusts.
If a split is impossible by year’s end, letter urges a sale of the whole company “for an attractive premium.”
Certain prize assets would have no trouble finding a buyer.
Billionaire investor Ron Burkle, former Olympics organizer and Major League Baseball Commissioner Peter Ueberroth and philanthropist Eli Broad all have indicated they would like to buy the Times or see it in local hands.
Trib shares, which shed half their value from early 2004 to this spring, rose in recent weeks as the Chandlers’ dissent fueled expectations of a sale.
Stock closed Wednesday up 2.9% at $31.94
The Chandlers also asked the board to appoint a committee of independent directors with its own legal counsel “to oversee a thorough review and evaluation of the management, business and strategic issues facing Tribune and to promptly execute alternatives to restore and enhance shareholder value.”
The dispute was years in the making but exploded earlier this month when Tribune decided to go ahead with a large $2 billion stock buyback. Many companies are repurchasing their own shares in order to boost the price.
The Chandlers, who have three seats on the board, had voted against the move and said so in an unusual filing with the SEC last week.
Wednesday’s letter called the buyback “a purely financial device that fails altogether to address the real business issues facing Tribune.”
And the Chandler Trusts, which hold 12.2% of Tribune, said they will not tender their shares.
Tribune owns 26 television stations and 11 daily newspapers. Chandlers’ letter noted the company’s strategy of reaping profits by combining broadcasting and newspaper properties in large cities has failed.
They also noted that an anticipated change in regs that would have made the cross-ownership of TV and newspapers in one market permanently legal hasn’t materialized.