Zell buys Tribune Co., Cubs to be sold

Chicago real estate tycoon buys troubled media company in $8.2B deal that values company at $13B with debt.

By Chris Zappone, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Real estate mogul Sam Zell has succeeded in his bid to take control of newspaper publisher Tribune Co.

Zell agreed to take Tribune (Charts) private in a $8.2 billion deal that values the entire company at $13 billion including debt.

Tribune also announced it would sell the Chicago Cubs baseball team after the 2007 baseball season ends in a move to relieve some of its debt. But the company has no immediate plans to sell other properties, its CEO, Dennis FitzSimons, told Reuters Monday.

"Certainly we do have some real-estate assets that could at some point be translated into cash, but nothing specific right now," he said.

Under the terms of the complex all-stock deal, which will take place in two stages, Zell will contribute $250 million in equity and receive convertible preferred stock in the company. An employee stock option program will be the main holding entity for the company but Zell will have rights entitling him to acquire 40 percent of Tribune's common stock.

Zell will take a place on the company's board once the first stage of the deal closes, which Tribune said should take place in the second quarter of this year. Zell will become chairman of Tribune once the entire deal is completed. That is expected to occur in the fourth quarter, according to the company.

The Tribune board will be allowed to consider rival offers, up until the time of shareholder approval.

The deal's low $25 million break-up fee deal could leave the door open to that possibility, although the board noted that it approved Zell after considering the last-minute bid by Los Angeles investors Eli Broad and Ron Burkle, who on Friday upped their offer to $34 a share.

CEO FitzSimons lauded the flexibility a privately-held Tribune would offer.

"As a private company, Tribune will have greater flexibility to transform our publishing/interactive and broadcasting businesses with an eye toward long-term growth," FitzSimons said in a release.

"Importantly, our employees will have a significant stake in the company's future," FitzSimons said.

Chicago-based Zell, who built a reputation for boosting the value of properties his firm Equity Group Investments acquired referred to himself as a "long-term investor" in the company's release.

Tribune shares rose nearly 3 percent in trading Monday.

Jim Goss of Barrington Research says Zell's contribution to the deal may be its structure which uses the tax-advantage of an employee stock ownership plan to create ownership.

"He's looking at a longer term time frame that will allow him to take advantage of a transitioning business," Goss said, who holds a market perform ranking on the company.

"At this stage, having sold out of Equity office, he has the funds and the time to direct to equity ventures," said Goss, adding that Zell is no stranger to media deals.

Zell had owned radio-network Jacor Communications through the 1990s until it was sold to Clear Channel (Charts) in 1999.

The Tribune deal ends months of speculation about the future of the media firm.

According to published reports leading up to the deal, Zell has pledged not to break up the company which, in addition to the flagship Chicago Tribune and the Los Angeles Times, owns several newspapers in other large markets and 23 television stations.

Many industry watchers have been closely watching the Tribune sale since it comes at a time of intense competition and change in the business. Newspaper publishers, such as Dow Jones and Co. (Charts), Gannett (Charts) and the New York Times Co. (Charts), have struggled during the past few years.

Competition from online news sites, blogs and free classified ad services on sites like Craigslist have cut into readership and advertising revenue.

Goss owns shares of Tribune through a long-term holding. Barrington Research covers Tribune but has no relationship with the company.

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