Tribune launches $4.3-billion tender

Tribune Co., Chicago-based parent of The Times, Wednesday launched its expected $4.3-billion tender offer for more than half of its shares. The offer is the first of a two-step leveraged buyout by Chicago billionaire Sam Zell and a new employee stock ownership plan.

The tender offer is aimed at repurchasing as many as 126 million shares of Tribune stock at $34 apiece in cash, financed by bank loans and a $250-million investment from Zell that was completed Monday, the company said in a statement. The tender offer is to expire May 24, although it could be extended.

“This tender offer will return significant capital to Tribune shareholders, including employees who currently own about 23 million shares of stock,” Dennis J. FitzSimons, Tribune chairman and chief executive, said in the statement.

Besides The Times, Tribune owns KTLA-TV Channel 5, the Chicago Tribune, the Chicago Cubs baseball team and other newspapers and TV stations. It has announced plans to sell the Cubs after the baseball season.

California’s Chandler family, Tribune’s largest shareholder with about 20% of the stock, has agreed to tender all its shares in the offer. When the Chandlers in June publicly criticized Tribune management and called for a sale or breakup of the company, they started the process that led to the buyout agreement signed April 1 and announced the next day.

The company said that if more than 126 million shares were tendered, it would purchase tendered shares on a pro-rata basis, except for “odd lots” of fewer than 100 shares, which would not be prorated. The 126 million shares represent about 52% of Tribune shares outstanding. If fewer than 126 million shares are tendered, the company said, it would repurchase them all, paying $34 in cash without interest “promptly after the expiration of the offer period.”

Neither Zell nor the new ESOP will tender any shares in the offering.

The tender offer is not contingent upon any minimum number of shares being tendered, Tribune said, but it is subject to obtaining financing and receiving a solvency opinion from “a nationally recognized valuation firm.”

Tribune said in a regulatory filing Tuesday that Zell had purchased 1.47 million shares for $50 million in cash Monday and had paid an additional $200 million for a note that is convertible into 5.88 million shares.

Having completed his initial investment, Zell will join the Tribune board no later than May 9, the date of the company’s annual meeting.

The ESOP also has made its initial investment, buying 8.93 million shares at $28 a share, financing it with a $250-million, 30-year promissory note from the company.

When the second stage of the transaction is completed in the fourth quarter, the remaining shares will be bought back with borrowed money. At that point, Zell will control about 40% of the company; the ESOP and Tribune management will control the remainder. Zell will be named chairman when the transaction is completed.

Depending on whether the tender offer is oversubscribed, the Chandlers may not sell all of their shares because they are subject to the same pro-rata terms as other shareholders, Tribune spokesman Gary Weitman said Wednesday. But even if the Chandlers sold only a pro rata 52% of their shares, it would bring their stake below 15%, triggering the loss of the family’s three seats on the board.

In a regulatory filing Wednesday, Tribune disclosed details of the conflict with the Chandlers and fleshed out the steps leading to its decision to strike a deal with Zell.

In February 2006, according to the filing, the Chandlers were pushing Tribune for a tax-saving restructuring of two family partnerships that the company had inherited in its 2000 acquisition of the Chandler-controlled Times Mirror Co., The Times’ former corporate parent. The Chandlers threatened that if they weren’t satisfied with Tribune’s progress, they would recruit other shareholders or outsiders to try to take over the company.

The filing also disclosed that Zell on Nov. 8 signed a confidentiality agreement allowing him to review Tribune financial documents. That was three months before his name surfaced publicly as a potential bidder.

thomas.mulligan@latimes.com