Wednesday, June 07, 2006

showdown in the tribco boardroom

following on the announcement of dennis fitzsimons' plan to borrow $3.4bn for essentially little more than naked executive entrenchment, this page is heartened -- finally! -- to see shareholder anger and activism take hold.

the chandler family trusts, the tribune company's second-largest shareholder, has voted to oppose the plan -- setting the stage for a confrontation between the board of directors and fitzsimons' derelict management team, which has done its level best to run the tribune company into the ground.

from the wall street journal:

In a securities filing yesterday, Tribune disclosed that all three directors appointed by the Chandler Trusts to the company's 11-member board had voted against the company's sweeping buyback program. That plan, announced last week, entails taking on about $2 billion of new debt to buy back up to 25% of the company's outstanding shares.

By laying bare the board disagreement, the unusual filing raises new questions about the challenges facing Tribune. ... Some investors saw the buyback as an effort to discourage hostile buyers of the kind of investor pressure that pushed Knight-Ridder Inc. into a sale, since taking on substantial new debt woudl make Tribune less appealing to suitors.

The Chandlers, who gained a 12% stake in Tribune through its $8.3 billion acquisition of Times Mirror Co. in 2000, didn't disclose their next move in the terse filing. ... But the filing itself shows the family, which controlled the Los Angeles Times for generations and was once among the best-known names in publishing, has moved into opposition against Tribune executives. At the least, intentionally or not, it could stir up other investor discontent.

this page would be surprised if those "other investors" wasn't alluding to chicago's ariel capital, among others.

what are the options going forward? the journal notes that the chandlers don't own enough of tribune to sell controlling interest to any other party, and doing so in any case would be a massive taxable event for the family. moreover, they are entitled to three tribune board seats by an amendment to the bylaws dating to the 2000 acquisition of times mirror -- so they are here to stay, in every likelihood. a fight for more board seats is a possibility, as is a negotiated settlement of differences between fitzsimons and the chandlers.

but the most intriguing option to the average cub fan is the complete breakup of tribco.

A full breakup of Tribune is another option. The company has already signaled that it is willing to divest certain assets, particularly some of its smaller television stations. A more drastic approach would be to separate the newspaper and the broadcasting assets entirely, potentially via a broadcasting spinoff. Last week, a person familiar with the company's plans said that was a possibility, but cautioned the company hadn't made up its mind.

what would become of the cubs in such a plan is impossible to say.

note that this is not necessarily the most direct avenue to prying the cubs away from tribco's deleterious exploitation (the nature of which was made clear by mark cuban recently, as noted by chuck over at ivychat). in adopting the debt, this page is of the considered opinion that tribco, holder of a declining core business and woefully managed at that, would as likely as not succumb to the pressures of increased debt servicing costs and be forced to liquidate ever more assets over time -- including perhaps the cubs -- simply as a purgative to its ill-advised debt feast. as noted in the journal, tribco has had static revenues for five years and is hardly likely to explode forward in that department; a growing cost of debt service in a higher interest rate environment isn't something tribco can likely grow out of.

but this page remains hopeful that tribco's unsettled management situation constitutes something far more promising than the decades of total futility and sickening stagnation that have characterized the ownership of this team now for the better part of a century. should other shareholders join the chandler trusts, fitzsimons' misguided clan might yet be routed and sent packing, allowing for perhaps more possibilities to sell the team.

there is of course no guarantee of positive change in any of this -- but no change at all remains as disgusting an option as ever it was, and cowardice in the face of the necessary risks that are a condition to any cathartic renewal of this moribund franchise remains something to be reviled. this page encourages you, dear reader, to embrace the troubles of tribco as would a prisoner a door left ajar -- no guarantee of freedom, but the best goddamned thing to happen in quite some time.

UPDATE: more from chuck, who tallies the share totals to give a sense of proportion to the battle now underway.

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