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Tribune, Times Mirror deal
March 13, 2000: 7:35 p.m. ET

Chicago publisher, Los Angeles Times owner to merge in $8B media deal
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NEW YORK (CNNfn) - Tribune Co. agreed to acquire Times Mirror Co. on Monday in an $8 billion cash and stock deal that will create a media giant with the nation's third largest newspaper group, television stations in the three biggest U.S. markets, as well as valuable Internet properties.
     The combined company, which will have revenue of over $7 billion and cash flow of more than $2 billion, will be based in Chicago and will keep the Tribune (TRB: Research, Estimates) name. The company said it does not expect any layoffs from the deal.
     Shares of Times Mirror, publisher of the Los Angeles Times, soared 75 percent, or 37-11/16 on Monday's announcement to close at 85-5/8. Tribune, owner of the Chicago Tribune, agreed to buy 48 percent of the outstanding stock of Times Mirror, or 28 million shares, at $95 each - nearly double Times Mirror's closing price Friday of 47-15/16. graphic
     While market reaction to the deal was mixed, most applauded it, saying that it brings together two powerful media brands and widens the combined company's ability to snag national online advertising accounts.
     "For Tribune, on a long-term basis, it's terrific," said Edward Atorino, an analyst at Wasserstein Perella Securities in New York. "While in the short term there's a lot of dilution, ultimately this will be a monster success."
     "The new Tribune Company is a multi-tiered, diversified media company with real strength in local media," Leland Westerfield, an analyst at Paine Webber, told CNNfn. (255K WAV)(255K AIFF)
     Other analysts voiced concerns about the short-term effect of dilution on the company's profits and valuation. Te deal will initially dilute reported earnings per share by 16 percent, but will add to cash earnings, a benchmark commonly used by broadcast experts, in the first full year the companies said.
     Credit Suisse First Boston analyst Steven Barlow downgraded his rating on Tribune shares to hold, based on the merger announcement. Shares of Tribune slipped 6-3/8 to 30-13/16 on Monday.
Creates No. 3 newspaper publisher

     Combined, the two companies will have a total circulation of about 3.6 million in the country's three largest cities, placing it behind newspaper publishing leaders Gannett (GCI: Research, Estimates) and Knight Ridder (KRI: Research, Estimates).
     Tribune owns 22 television stations and, with its cable and satellite coverage, reaches 75 percent of U.S. television households. It has long promoted coordination among its various media properties, including a cable TV station and its newspaper Internet sites. It will also hold many other media properties such as the magazines Field & Stream and The Sporting News, the Chicago Cubs professional baseball team and a publisher of educational materials.
     The company's broadcasting holdings bring in about 40 percent of its revenue and include WGN in Chicago, WPIX in New York, four radio stations, Tribune Entertainment (TV programming), and stakes in several broadcasting companies, including the WB Television Network.
     The deal was approved late Sunday night by Times Mirror's board of directors. Tribune executive said talks between the parties had been held in earnest since just after the start of the year.'
    graphic "Our new company will be the best positioned, local market media company for the future," said John Madigan, Tribune's chairman and chief executive officer.
     The 116-year-old Los Angeles-based Times Mirror publishes five metropolitan and two suburban daily newspapers, including The Baltimore Sun, The Hartford Courant, and The (Stamford) Advocate and Greenwich Time, serving Connecticut's affluent Fairfield County.
     The premium is one of the highest ever paid for a publicly traded company. Because the arrangement did not involve competitive bidding, it includes a mechanism under which other bidders would have 20 calendar days to top Chicago-based Tribune's offer.
     After completion of the tender offer, an offer made directly to shareholders, each Times Mirror share will be exchanged for 2.5 shares of Tribune stock. If Tribune scoops up less than 28 million of Times Mirror's shares, the company will offer stockholders cash instead. If the offer is fully subscribed, Tribune will repurchase up to $700 million of the stock to achieve an equivalent of a 50-50 stock, cash deal, the companies said.
     Los Angeles' Chandler family, which owns more than 60 percent of Times Mirror, initiated the talks and have pledged to vote in favor of the agreement.
     Prudential Securities analyst James Marsh told CNNfn that the deal would be quite lucrative for the family, which had been unhappy with the performance of the company's stock. (199K WAV)(199K AIFF). Before today's rise, Times Mirror stock had slumped some 30 percent in the past two months.
More media deals to come?

    Experts said the deal would likely spark speculation about consolidation in the newspaper business, as so-called "old media" companies and "new media" Internet companies look for ways to marry content and Web distribution to reach more consumers.
     "What I see going forward is not rounds of consolidation among newspaper companies, but we will see the value of prominent brands, like the New York Times and Wall Street Journal, become more important to investors ... in the new media world," Paine Webber's Westerfield said.
     While prominently known for their newspapers, the merger of the two companies will form an Internet company with approximately $55 million in projected 2000 revenue and an estimated 3.4 million unique monthly visitors to its sites, the company said.
     "This deal may get people to start dusting off their files about newspaper values," Wasserstein's Atorino said.
     Federal regulatory agencies will review the terms of the transaction, but Mark Willes, chief executive of Times Mirror, told the Los Angeles Times late Sunday that since the two companies do not directly compete in any market, he would be "astounded" if the government raised any objections.
     Under the leadership of Willes, a heralded cost-cutting expert, Times Mirror slashed spending and folded two papers. While the company's stock tripled in value under Willes' watch, Times Mirror suffered public relations setbacks following strategic moves that raised concerns about the relationship between editorial and advertising at the paper.
     One episode saw the paper sharing revenues from a Times-produced magazine issue in October 1999 with the subject of the issue, Los Angeles' Staples Center. The L.A. Times is a founding partner of the Staples Center.
     In December, the paper published a 14-page special section in which its journalists vented their anger over the scandal, which became known as "Staplesgate." The section followed a front-page apology to L.A. Times readers in which publisher Kathryn Downing and editor Michael Parks admitted, "... we did not disclose to our newsroom or to you, our readers, that we shared the profits on the issue of the magazine with Staples. That was a mistake."
     Willes does not plan to stay with the company once the deal is completed, according to a Los Angeles Times report. Kathryn Downing, publisher of the Times, said she does not intend to resign, and Tribune executives, on a conference call with the reporters, said they look forward to working with her. Back to top


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