Wednesday, June 14, 2006

break up the tribune company!

just a week after this page pleaded to jim hendry to break up the cubs, it appears we're perhaps getting more than we hoped for. crains's today details the chandler family's plan to break up tribco into salable parts to try to unlock the value in the company that dennis fitzsimons' management has done its best to hide.

The company had disclosed earlier that the Chandlers opposed the buyback but didn't detail their reasons. In a letter to the company's board of directors included in a regulatory filing Wednesday, the Chandlers called the process by which the board considered the buyback "fundamentally flawed" and "a purely financial device that fails altogether to address the real business issues facing Tribune."

In their letter, the Chandlers said Tribune must find a way to separate its broadcasting holdings from its newspaper business, saying that the company's strategy of owning broadcasting and newspaper properties in the same cities has failed to deliver growth.

They also noted that an anticipated change in regulations that would have made the cross-ownership of television and newspaper properties in the same cities permanently legal has not occurred.

the article was also echoed in bloomberg, with ariel capital weighing in.

The publisher of the Los Angeles Times and the Chicago Tribune should sell units or put the whole company up for sale, some of the company's largest shareholders said. They cited a 10 percent drop in the stock in the past year and management's failure to maximize profits of TV stations and the Chicago Cubs baseball franchise.

``Something will be done,'' said John Miller, a money manager at Ariel Capital Management, which owns 10.3 million shares, or 3.4 percent, of Tribune. ``You have to take a more aggressive strategy. The true value of the company isn't being reflected in the share price.''

Ariel wants Tribune, the second-largest U.S. newspaper publisher, to dispose of the broadcast unit and become a pure newspaper company, Miller said. The newspaper company then may be sold, echoing McClatchy Co.'s $4.5 billion purchase of Knight- Ridder Inc., the No. 4 U.S. newspaper publisher.

``There's a broad recognition this is a powerful set of assets,'' said Lawrence Haverty, who helps manage $28 billion, including about 4.9 million Tribune shares, at Rye, New York- based Gamco Investors Inc. ``The old-line media companies are realizing they've got assets that if managed correctly can benefit them mightily.''

``The best outcome is that the Chandlers continue to push for more value,'' T. Rowe's Cheseby said. ``Management has been undertaking some changes, but the Chandlers going public proves that what the best changes are is still a point of negotiation among the board.''

how the cubs fall out of this scenario, as this page has said, is not clear -- but note particularly the line of criticism regarding "management's failure to maximize profits of TV stations and the Chicago Cubs baseball franchise." the team is clearly on the radar here, but as a disappointing asset -- this should be news to those many who think of the cubs as one of tribco's most invaluable properties, one which the company would never divest itself of.

of course, there is the flip side to that coin, which is that tribco's owners think more blood should be squeezed from the rock -- almost certainly, given the rather limited growth characteristics of a sports franchise, meaning that salary and compensation should be cut.

there is no avoiding change, regardless of how much some would like to stick their heads in the sand and pretend the status quo could always be. tribune company is in severe trouble, and the cubs will be affected by it in one of two probable ways: the team payroll will contract in the immediate future -- likely beginning with greg maddux, kerry wood and aramis ramirez -- or the team will be sold to a different owner.

those are the options. that is the choice.

as a result, this page wholeheartedly continues to endorse any direction in which the cubs may move away from tribco. a quarter century of extortive management has not only been more than enough; the prospect of the team being tied to the fiscal rack to finance the mismanagement of the fitzsimons gang is what it has to look forward to. whatever the risks and hazards of ownership change, from a fan's perspective there is now no reason whatsoever not to endure them. break up the tribune company -- and pray that the cubs are spun off for cash.

UPDATE: more from chuck, whose coverage has been spotless.

UPDATE: bloomberg reports that moody's today cut tribune company bonds to junk status -- meaning that a great many institutional holders of tribune debt will now, because of bylaws forbidding them from owning anything but investment-grade debt instruments, be forced to liquidate those bonds onto the market. tribco's financing costs for its stock-buyback scheme just went even higher. (hat tip to commenter blueisthecolor.)

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