Tribune Co. said it reached a settlement in its appeal of the 2005 Tax Court decision that had disallowed the tax-free reorganization of Matthew Bender, a former legal-textbook-publishing unit of Tribune’s Times Mirror subsidiary.
Under the proposed settlement, the Chicago-based media conglomerate will receive refunds of roughly $350 million in federal and state income taxes and interest that were previously paid both in the Matthew Bender transaction and a similar transaction completed by Times Mirror.
According to the Associated Press, Tribune had said at the time of the 2005 ruling that the case could cost it $1 billion unless it won on appeal.
Tribune acquired Times Mirror in June 2000, inheriting the tax dispute that dated back to 1998, when Times Mirror sought to reorganize the Matthew Bender division on a tax-free basis. At that time, a U.S. Tax Court had initially disallowed tax-free statusfor the deal.
The AP noted that the 2005 ruling had played a role in the rapid descent of Tribune’s stock price, and had led to its largest shareholders pressuring the company to put itself up for sale. In April, Tribune agreed to an $8.2 billion buyout led by Sam Zell.
In a press release, Tribune cited language that was used in a filing with the U.S. Court of Appeals for the Seventh Circuit, saying that counsel for both parties are optimistic that the case can be resolved without court intervention, although a resolution is not certain. The court has agreed to defer the June 5 oral argument for 90 days to allow for government review and approval of the offer, Tribune added.
The company said it expects to have more information regarding its settlement offer in the third quarter. It stressed, however, that both parties are restricted from publicly discussing the terms of the settlement agreement.