After months of wrangling and behind-the-scenes drama, Tribune Co. has completed its $8.2 billion transaction that takes the Chicago-based owner of newspaper and TV stations private under a complex employee-ownership buyout deal led by real estate mogul Sam Zell.
Zell becomes chairman-CEO of Tribune, following Wednesday’s news that longtime company exec Dennis FitzSimons resigned his CEO post (Daily Variety, Dec. 21). Tribune announced Thursday that under the new ownership structure, the company that owns the Los Angeles Times, Newsday, the Chicago Tribune and 23 TV stations will be governed by a board of eight directors, chaired by Zell.
“The transaction from hell is done,” Zell said at the start of a news conference at Tribune’s HQ on Thursday. “It’s also the transaction that nobody in the world except us collectively believed was going to happen — but it did.”
From the time the pact was announced in early April, there were many questions about the financing of the deal, given the jolt to the credit markets this summer caused by the subprime mortgage crisis, and whether the resulting private concern would be hobbled by its heavy debt load.
Zell stressed that the company’s new employee-ownership structure will allow Tribune to become a tax-free entity, providing the cushion it needs to service its debts and grow revenues without the pressure of meeting quarterly earnings expectations. Zell is investing $315 million upfront for warrants that will allow him to purchase 40% of Tribune within the next 15 years for $500 million-$600 million, depending on when the transaction occurs.
Newly appointed Tribune directors are ICM chairman Jeff Berg; Greenspun Corp. CEO Brian Greenspun, prexy and editor of the Las Vegas Sun newspaper (Greenspun has also taken over a portion of Zell’s equity investment in Tribune, the company said); William Pate, longtime Zell adviser and chief investment officer of Equity Group Investments; Maggie Wilderotter, CEO of Citizen Communications; and Frank Wood, CEO of Cincinnati-based venture capital firm Secret Communications. Incumbent Tribune directors William Osborn and Betsy Holden will continue as board members.
Zell is stocking the company’s ranks with execs who have worked with him in the past, starting with the appointment of Randy Michaels as veep and CEO of Tribune’s interactive and broadcasting units. Michaels previously ran the Zell-owned radio station group Jacor prior to its acquisition by Clear Channel Communications in 1999.
Gerald Spector has been named exec veep and chief administrative officer. Spector most recently served as exec VP-chief operating officer of Zell-owned real estate concern Equity Residential.
Zell said he took on the CEO mantle, spurring FitzSimons’ departure (though FitzSimons remains chairman of the Tribune Foundation philanthropic arm), because he wanted to implement his own vision for revitalizing the company with a different management style than the centralized focus under FitzSimons and his predecessor.
“I felt that I needed to be a direct agent of change, and I promise you, you will not be disappointed in me fulfilling that objective,” Zell said, emphasizing that the company needs to shift its focus from cost-cutting to growing its revenues. In an email message sent to Tribune’s 19,000 employees, Zell promised, “You’ll see a lot of changes in the coming months.”
Despite the doom and gloom surrounding the newspaper biz in recent months, Zell said during the news conference that he’s bullish on the ink-stained sector and sees opportunity to better integrate Tribune’s papers with its TV stations and growing Web portfolio.
“I’m sick and tired and listening to everybody talking about the end of newspapers. They ain’t ended, and they’re not going to end,” he said in the folksy manner that made him a standout in the real estate development world during the past 30 years. “Newspapers need to be repositioned and incorporated with our other media sources,” Zell said.
Zell said he had no particular editorial aspirations of his own, joking that he was “shitty in English” during his high school days and that he doubted he had much of a chance of “influencing all of those opinionated people” in the newsrooms of Tribune’s papers.
For the foreseeable future, Tribune has no plans to pursue acquisitions, nor does it plan any major asset sales, other than the previously announced sale of the Chicago Cubs baseball team. Zell said he expected a deal for the Cubs to materialize before the start of baseball season next year.