Friday, December 28, 2007

Zell gets winner's prize, of sorts

In "CEOs: The Winners and Losers of 2007", Fox/Business awards Sam Zell a winner's prize for the Tribune deal in which he "agreed to invest $315 million, while the bulk of the company’s debt is taken on by Tribune’s employee stock ownership plan."

The prize? "The services of a top-flight labor lawyer."

We're betting he has not one, but a team of them. Makes sense.

We do.

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In Hartford, banner announcements

"You own this place" say banners hanging around the Hartford Courant. Columnist Jim Shea writes:

Some employees are taking this ownership thing more seriously than others. I'm taking it seriously.
He's taking notes, looking for a private office and taking note of the dead wood with nice offices. Pretty funny column offers opportunity to comment on likely upcoming change...
One change that would be welcome is if people stopped saying we are going to do more with less. The only thing you can do with less is less. It's a math thing. You could run the numbers.
But he's optimistic, he says. So are others we've talked with in recent days. But like Jim, they don't have "stupid stamped on [their] forehead[s]", either.

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Sunday, December 23, 2007

Zell's daring purchase

Tim Rutten, long-time Los Angeles Times journalist, concludes in his last 'Regarding Media' column that the sale that "transformed the Tribune Co. from a publicly traded corporation into a private, nonprofit organization owned by its employees, but run by billionaire investor Sam Zell, brought a disastrous journalistic experiment to an ignominious close", and —

The era of corporate accumulation has been an unmitigated disaster for American journalism. Money has flowed like a fiscal Mississippi into the pockets of investors and fund managers, draining one newspaper and TV station after another of the resources necessary to serve their communities' common good. Nearly every American newspaper and local television station sucked into one of the chains -- from the largest to the smallest -- during that period is today a lesser journalistic entity of less real service to its audience than when it was acquired.

That's what makes Sam Zell's daring purchase of Tribune not only a great financial opportunity but also a historic opportunity for American journalism -- a chance to demonstrate that private ownership can reestablish the link between good business and good journalism that initially was forged by familial proprietors.
Tribune employees have been forced to assume a huge risk — after all, they weren't actually invited to be owners, right? — but now, perhaps with Zell at the helm, The Deal may prove to be "a great [long-term] financial opportunity" for the employees who have invested their dedication, time and talent.

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You own Tribune now

You and Sam Zell.

"I've always said that what this company needs is an owner," Zell said Thursday. But Zell, the self-proclaimed "new sheriff in town", the CEO that refers to himself as the new owner, didn't have to answer even one question about the ESOP at his news conference in Tribune Tower Thursday. "Zell should be mighty grateful that no journalist brought up the inconvenient truth that this ESOP is structured [in such a way] that employees will have almost no "ownership" voice for a long, long time", wrote E&P in a commentary "Why Sam Zell Avoids the 'Big Lies' of New Owners" posted late Friday night.

The ESOP worries a whole lot of folks. In place of company contributions to a 401(k), employees now have equity in a company saddled with $13 billion in debt. But Zell dismisses nay-sayers and pessimists. "The bottom line is that this company has significant cash flow cushion going forward," Zell said. "We do not expect that we will have any problems servicing our debt in the near future." From LAT

Over the next 10 years, he said, if all Tribune accomplishes is to pay off its loans, he and the employees would be free-and-clear owners of an enterprise worth billions of dollars.
Indeed, hopes are higher these days. Zell brings promise of a "brand new day" given his long history of business brilliance and strategic successes. "If you look at my track record, I haven't spent much time disassembling anything," Zell said in an interview Wednesday, "and I've spent my entire career building things."

Despite fears that he will make big cuts, Zell said Friday that Tribune will likely add to its 20,000+ employee staff in the next year. In a videotaped interview with CT and LAT reporters that was later posted on the company's Web site, Zell said "I think we'll have more employees a year from now than we do today. I'll also tell you that it's unlikely that all the deck chairs will be in the same place."

Folks are cautiously optimistic. Bill Salagnick, president of the Washington-Baltimore Newspaper Guild, which represents most employees at the Baltimore Sun, said the union has had no indication of whether there will be further cuts in staff. "I think Tribune has gone through a hard few years and some fresh approaches and fresh ideas could help us," said Salganik, a Sun business reporter. "But as a general proposition, we think that you need to have enough people here to put an attractive product in the hands of readers."

Zell promises plenty of change but announced nothing specific. Plans are to de-centralize the company that has been top-down directed, give the individual properties greater local control and hold those in charge "accountable". (An unedited video of Zell's announcement Thursday is here at

Zell set up a "Talk to Sam" link on the Tribune site. Too bad it's just for employees because we sure would like to ask him a couple of questions about the ESOP and how the other new owners can participate in the decision-making and future direction of the company. But maybe in the next few months, you'll ask him how you can exercise your new ownership voice on "Talk to Sam".

In the meantime, we'll be here.

Tribune photo by Charles Osgood

(end of post)

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Tuesday, December 18, 2007

A golden parachute worth forty million dollars (or so)

That's what Tribune's CEO Dennis FitzSimons will walk away with. From LAT

FitzSimons' [expected]resignation is not surprising, given the differences in his and Zell's management style. FitzSimons has established a highly bureaucratic and centralized management structure, and Zell is known for an entrepreneurial approach. Zell is expected to reduce corporate overhead by delegating more operational decisions to executives at individual business units.
FitzSimons had been instituting expense reductions across the company. But those actions created turmoil, especially at the newspapers. At The Times, two publishers and two editors resigned in opposition to staff and budget cuts ordered from Chicago headquarters. Similar turnover occurred at other newspapers in the chain.

No surprise. The price for working to make the Zell Deal happen.

Zell plans to change Tribune's corporate culture.

Also: Another casualty of the Tribune Co. buyout by Zell is the Tribune Entertainment division, which will soon be shuttered.

Meanwhile Tribune Co. will pay $15 million to the federal government to settle charges that its Long Island, N.Y., newspaper Newsday and New York Spanish-language paper Hoy misstated circulation in 2004. "Tribune was one of a handful of publishers to reveal erroneous circulation numbers in 2004, in a scandal that has cast doubt on the credibility of circulation figures, which are used to determine advertiser rates."

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As expected, FCC overturns cross-ownership ban

Big Corporate Media got a boost today. The 3-2 vote today along party lines overturns the 32-year-old rule prohibiting media companies from owning a newspaper and broadcast station in the same market. (Tribune already has its waivers.)

The vote came amidst enormous public pressure and warnings from 25 members of Congress. Chairman Martin has continually expressed concerns about the steady decline in revenue for newspaper companies, but declines in revenue notwithstanding, media companies are still averaging 17%-18% profits — more than any industry in the Fortune 500. From AP -

Opponents of the ban say in the past decade there has been an explosion of news outlets thanks to cable television and the Internet and that such restrictions are no longer necessary. Ban supporters say there may be additional outlets, but there has been no corresponding increase in news gatherers and producers, especially at the local level.
Tribune stock nears magic number: After hitting a one-year low of $22.78 in August, the stock hit a new one-year high of $33.40 today. It closed at $33.31.

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Friday, December 14, 2007

Did you quit smoking, Mr. Zell?

The $100 per month penalty for being a smoker starts in a couple of weeks.

Employers like Tribune ($100 monthly), Gannett ($60 monthly), Northwest Airlines and PepsiCo Inc. ($20-$50 monthly) now require employees and their dependents who use tobacco to pay a surcharge in hopes of motivating workers to quit the habit and help offset the high insurance costs for employers and their workers.

When Tribune announced its surcharge plan to employees in October, it also launched a free employee smoking cessation program: employees who enroll and complete the program get the fee waived.

Better throw away those Marlboros, Mr. Zell. What? The surcharge doesn't apply to you? Oh.

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Wednesday, December 12, 2007

Deal could be done December 20

Zell hopes it closes next Thursday. "The assets are truly extraordinary and we have a great opportunity to make a serious difference."

Bet he isn't referring to the real assets of the Company: the soon-to-be employee-owners denied voice and vote under The Deal. Could be problematic under Section 310-D of the Communications Act, according to this. (end of post)

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Tuesday, December 11, 2007

New year, new owners

New ownership of three major news organizations — Tribune, Thomson-Reuters and Dow Jones — will "significantly impact the news and informations business" according to this commentary from The Century Foundation. It advises all three mega-companies that "the journalists who work for you, the people who produce the content your companies were founded to supply, will respond much better to inspirational and creative leadership than to intimidation and diminished resources."

Yeah, but that's not all: A voice in the workplace and the ESOP would give all those hard-working folks — you know, the ones that give Tribune its real value — a better greater of ownership and security.

In all the interviews and speeches he has given and all the profiles about him, Zell has emphasized his commitment to excellence in everything he does. But his strategy for the business so far has been cast in financial terms rather than journalistic output ... For the moment, Zell seems more focused on a business turnaround at Tribune than on a reinvention of its journalism.
The big question is whether Zell can succeed in his business goals without making sure the properties he controls—the newspapers, mainly—are preeminent in their territories. The Los Angeles Times, in particular, has been battered for the past decade by various forms of dissension at the corporate level and in its proud newsroom. The Baltimore Sun is another major trouble spot.
(end of post)

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Monday, December 10, 2007

The Lawsuit

Aside from addressing the temporary nature of the FCC waivers, Tribune's lawsuit is also a legal maneuver intended to have the court strike down the cross-ownership ban entirely. Explained here.

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Friday, December 7, 2007

More analysis, comment and speculation (some facts, too)

Here's WSJ Deal Journal's comment on the company's solvency opinion.

The stock jumped nearly 8% to close at $32, its highest price in six months, as Wall Street skeptics finally seemed to acknowledge that the deal was likely to close this year after all, and at the announced $34 price.
But Newsday reports: "Tribune's bonds are trading at distressed levels, and prices on derivatives linked to the bonds imply a more than 80 percent chance the company will default during the next five years."

Judging by the increased number of hits to this blog recently, folks are thirsty for as much info on the Zell Deal they can get. Info is important to the not-quite-yet employee-owners as the Deal moves ever-closer to completion. Staffers are worried about how the buyout will impact their jobs. Most do have a lets-wait-and-see attitude, which does not mean they don't have very real concerns about how the monstrous debt of this media giant will hit their pockets.

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Thursday, December 6, 2007

Temporary waivers granted, Tribune sues FCC * **

*Updated: The company filed suit in the D.C. Court of Appeals Wednesday over the FCC's decision to grant temporary waivers for the company's newspaper-broadcast cross-ownerships in Los Angeles, Chicago, New York, Hartford and Orlando. Why would the company sue a commission that just saved its buyout deal? Because it still gets the waiver whether it sues or not, but it wanted permanent waivers. So if it wins, the newspaper-broadcast cross-ownership ban could get thrown out altogether. Broadcasting&, E&P

Shares jumped, closing at $32.00

** Correction: The waivers are temporary for Los Angeles, New York, Hartford and Miami-Ft. Lauderdale. A permanent waiver was granted for Chicago.
(end of post)

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Tribune to put up $500M cash to move takeover along

It will use cash on hand to reduce the bridge loan it took to buy out public shareholders from $2.1 billion to $1.6 billion. The bridge loan was part of the 2-step process that will take the company private. CNNMoney reports that analyst Mike Simonton said "the $500 million payment eases Tribune's costs, as it was made on a debt slice with hefty interst costs" and "the payment may also help Tribune clear financial tests laid out in its credit agreements."

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