Sign of LA Times: Chandlers Back In Picture, Geffen Stays In Game

by Erik Sass, Dec 18, 2006, 8:00 AM

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The Tribune Company did not respond to a high-profile bid for the Los Angeles Times from Hollywood mogul David Geffen last week, but a bigger deal with dissident shareholders from the Chandler family may be in the works.

Geffen made a $2 billion bid for the Los Angeles Times, the paper reported Friday--but the Tribune Company wants time to consider other bids for the entire company. Geffen's bid is considered a reasonable price for the paper, but Tribune is seeking more advantageous financial terms by selling its properties as a group. Altogether, the company's assets are valued at $8 billion to $8.5 billion, with annual revenues in 2005 of $5.7 billion.

The competing offer from the billionaire Chandler family, which owns 20% of the stock, is surprising. It comes after complaints about the company's poor performance and running counter to previous suggestions. The Chandlers kicked off the consideration of bids in June, when they suggested that the company be dismantled and sold off piece by piece.

The Chandlers said the performance and value of individual properties would be boosted if they were unbundled. Now, the family shareholders are taking a different tack, recruiting investors to help them bid for ownership of the entire company.

Analysts speculate that the Chandlers' latest move comes in reaction to the tepid response to the Tribune Company auction in the business world. Alarmed by the possibility of low bid prices, they may be planning a leveraged buyout with private-equity firms. As part of the buyout, the new owners may dismantle the company as originally planned--spinning off additional assets, including 22 television stations that remain unsold.

The Tribune Co. has also attracted expressions of interest from private-equity firms, as well as two Los Angeles-area billionaires: Eli Broad and Ron Burkle. Although the noises could mean a competitive auction, the lack of interest from other major newspaper publishers is a telling sign of the industry's health.

The Tribune Co. has already sold off a raft of peripheral properties valued at about $500 million, including a number of local television stations.

Although Tribune Co. board members have condemned the Chandlers' motives as mercenary in the past, it's unclear that ownership by "benevolent" billionaires like Geffen, Broad, and Burkle would be much better.

All three men have said they want to take ownership of the Los Angeles Times as a service to the community. They envision freeing the newspaper from stock market pressures and enabling it to refocus on quality journalism. But ownership by "sugar daddies" is no panacea, if the recent acquisition of the Philadelphia Inquirer and Philadelphia Daily News by private investors is any indication.

Led by Brian Tierney, CEO of Philadelphia Media Holdings, Philly-area investors vowed an end to the strategy of "cut, cut, cut for short-term profits" that typified corporate ownership. However, less than five months later, Tierney was quoted as saying that substantial layoffs at both papers are "unavoidable," given long-term structural trends affecting the newspaper industry. Rumors are circulating that he plans to ax as much as 30% of the newsroom--about 150 people.

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