Thursday, March 22, 2007

Why buy Tribune stock thru an ESOP vs. on the open market?

I am a 30-year newsroom employee at the Baltimore Sun. First off, I want to thank you for your informative Q & A on ESOPs. It's a great summation.

I do have one question: while I read at the end that the Guild-CWA wouldn't offer individual advice to investors, I wonder if you could address at some future point in a general way why an employee would make a discretionary investment in an ESOP being proposed as a buyout/takeover strategy.

If employees wanted to own tribune stock, or buy more of it, why wouldn't they buy it on the open market as opposed through an ESOP?

1 comment:

Contributors said...

We passed your question on to our ESOP expert and received the following answer:

"Your question about why employees might make a discretionary investment in a future ESOP when they could theoretically make such an investment on the open market is a good one. It does, however presume that the ownership and employment structure of any successor entity to the Tribune Corporation would, like Tribune, be publicly traded on the stock exchange. There are several possible final resolutions to the Tribune transaction ranging from the creation of a new, large, publicly traded entity comprised of a familiar “bundle” of media properties with or without an ESOP as part of its overall design to a radically decentralized list of “stand alone” media properties proceeding on their own corporate ownership and employment “feet” as privately held corporations with or without an ESOP as part of the mix.

"If the successor structure is publicly traded with an ESOP then discretionary employee investments could use ordinary purchasing channels. If the successor structure results in a privately held firm with an ESOP then discretionary employee investments would follow a different route that conforms to Federal and state securities laws in the locales where the firm or firms will operate. Discretionary investment choices in this second case would be made only after employees receive relevant financial information and presentations from management groups about the content of their business plans."