Company suing FCC; stock rises
As it prepares to close its $8.2 billion buyout deal, Tribune Co. has found itself at the center of a D.C. conspiracy theory involving the commission’s controversial effort to repeal its newspaper-broadcast cross-ownership ban.Tribune has raised hackles in the Beltway by filing an appeal with the D.C. appellate court of a beneficial ruling the GOP-controlled FCC made on the company’s behalf last week. One Democratic FCC member said Tribune’s legal action is providing convenient cover for the FCC’s GOP majority to repeal the newspaper-broadcast cross-ownership ban — a ban that still enjoys strong bipartisan support in Congress. The brouhaha over the Tribune ruling appeal comes three days after Federal Communications Commission chief Kevin Martin became the target of a congressional inquiry, spurred in part by his effort to accelerate the commission’s vote on eliminating the ban (Daily Variety, Dec. 4). Tribune needed the commission to grant it temporary waivers of the cross-ownership ban so it could close its complex buyout transaction led by Chicago real estate magnate Sam Zell by the end of this month, or it would run the risk that the deal would fall apart entirely. To those against repeal of the ban, Tribune’s legal filing is payback to the commission for acting swiftly last week to protect Tribune’s buyout, which will take the Chi-based company private. Democratic FCC commissioner Michael Copps called Tribune’s appeal, filed Wednesday, part of a “scripted production” directed by the FCC’s Republican majority. Before the commission held its special Nov. 30 vote on the Tribune waivers, the Zell buyout was in danger of getting held up by the FCC’s pending decision on whether to repeal its decades-old ban on a single company owning TV stations and newspapers in the same market — a rule Tribune and other media concerns have lobbied to kill for years. Tribune needed certainty from the FCC that it would not be forced to divest key assets in five markets — including New York, where it owns Newsday and WPIX; and Los Angeles, where it owns the L.A. Times and KTLA — or the Zell transaction would likely be scuttled. Nor could Tribune afford to wait for the FCC to complete its review of the cross-ownership ban after promising its lenders and the markets that the Zell buyout would close by year’s end. The company had sought permanent waivers, but Martin devised a plan to offer only temporary waivers. In a straight party-line vote, the GOP-controlled commission approved the temporary waivers last week. Tribune’s appeal challenges the commission’s denial of the company’s request for permanent waivers. Following that vote, Copps and others predicted that the commission would still face a legal challenge from Tribune as part of a strategy to bring down the cross-ownership ban, which GOP commissioners do not like. Martin last month proposed a compromise solution that would eliminate the ban in the nation’s top 20 markets, with some qualifications. Copps said that denying the permanent waivers Tribune requested in favor of temporary ones was merely an invitation to Tribune to sue the FCC for the denial, initiating a legal case that will likely challenge the entire ban and its legality in all markets. A little-noticed provision of the ruling on the temporary waivers gave Tribune the option of accepting the two-year temporary term or a term that would extend for six months beyond the close of litigation on the denial of the permanent waivers. “The FCC majority did everything it could to ensure that Tribune would challenge the newspaper-broadcast cross-ownership ban in court,” Copps said. “Tribune apparently now has done their part. The next step will be for the majority to mount a lukewarm defense of the rule in court and hope that the entire rule gets thrown out. In the final act, the majority will say they tried to do something more moderate, but the court simply wouldn’t allow it. And the curtain will fall to thunderous applause from Beltway insiders who appreciate a clever script that only they can follow.” An FCC spokesman said Martin would not respond to Copps’ claims. In an email message distributed to employees, Tribune CEO Dennis FitzSimons bolstered Copps’ argument, albeit in less cloak-and-dagger terms. “This appeal was, in essence, invited by the FCC’s action on Friday,” FitzSimons wrote in the email. Meanwhile, Tribune received some welcome support on Wall Street Thursday after it announced it has decided to use some of its cash on hand to shave $500 million from the bridge loan it will need to close its going-private transaction. That loan was initially projected at $2.1 billion but now will drop to $1.6 billion. The move was applauded by Wall Street, which had fretted that Tribune would be crippled by a heavy debt load after going private under the complex employee ownership buyout led by Zell. After months of grim reports about declining revenues and profits at its core newspaper and TV station operations, the positive news for Tribune combined to push up its stock by $2.31, or 7.78%, Thursday to $32. The spike helped close some of the gap between its recent trading price and the $34-per-share buyout price to which the Zell group agreed in April (Daily Variety, April 3).
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