Capital Markets

Despite Crunch, Tribune Board OKs Merger

Sam Zell, whose money would support the going-private arrangement, puts on a brave face.
David KatzAugust 21, 2007

Tribune Company shareholders approved the company’s previously announced plan to go private on Tuesday, according to the company, which expects to seal the deal in the fourth quarter of this year.

At a special shareholders meeting in Chicago, owners accounting for about 97 percent of the shares voted in favor of the deal, which would involve a merger with the company’s employee stock ownership plan. The number of shares voted in favor of the merger made up about 65 percent of the total shares outstanding and entitled to vote at the meeting. Under the arrangement, shareholders would get $34 per share. On Tuesday, the company’s stock closed at $27.98 per share.

Upon completion of the deal, the Tribune ESOP would hold all of Tribune’s then-outstanding common stock. Further, real estate mogul Samuel Zell would hold a subordinated note and a warrant entitling him to buy 40 percent of the company’s common shares. Zell, who is supporting the transaction with a $315 million investment, would become chairman when the merger closes.

According to a plan published by the company in April, the ESOP would immediately buy $250 million of newly issued Tribune common stock for $28 per share. Zell would first invest $250 million. Of his initial investment, $50 million would buy about 1.5 million newly-issued shares of Tribune common stock for $34 per share and $200 million would buy a note exchangeable for common stock at a $34 per share exchange price.

When the merger is completed, Zell’s initial $250 million investment would be paid back to him, and Zell would make a new investment by buying a subordinated note for $225 million with an 11-year maturity and a warrant for $90 million with a 15-year maturity. The warrant could be exercised by Zell at any time to acquire 40 percent of Tribune’s common stock for an exercise price of $500 million.

Zell seems to be trying to ward off doubts about the deal stemming from the current overall credit crunch. “I believe Tribune Company is reasserting itself as a national leader in news generation and distribution. Despite the recent upheaval in the credit markets, my view of the company as an investment has not changed.”

“We’re pleased that Tribune shareholders recognize the value of this transaction and have voted overwhelmingly to approve it,” said Dennis FitzSimons, Tribune chairman, president, and chief executive officer. “With financing fully committed, we anticipate closing the transaction in the fourth quarter, following FCC approval and satisfaction of the other closing conditions.”

One of the country’s top media companies, Tribune own the Los Angeles Times, Chicago Tribune, New York Newsday, The Sun in Baltimore, South Florida Sun-Sentinel, Orlando Sentinel, and Hartford Courant.

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