• by Erik Sass , March 19, 2007

The attempted auction of the Tribune Company may just be the strangest media non-event in recent memory. Last week, the latest bid, from Chicago real estate mogul Sam Zell, failed to satisfy the Tribune's finicky board of directors. Although no bid has yet been rejected outright--adding to the auction's general air of ambivalence--Zell's bid, like two previous ones, appears to be headed for oblivion.

Zell's $13 billion bid, including a promised investment of $300 million of his own fortune, had several plusses: it would give ownership of the company to an employee stock-option plan, and unlike the earlier proposals from Los Angeles-area billionaires Eli Broad and Ron Burkle and the Carlyle Group, it would have kept the company's various properties together--a high priority for the board. By their own account, Broad and Burkle were mostly interested in gaining control of the Los Angeles Times, implying that the rest of the company might later be sold off in pieces. Carlyle's bid was limited to Tribune's TV stations.

It's not clear what consequences, if any, will result from the passing of the non-auction's March 31st deadline, imposed by the board of directors when the process began in November 2006. Shareholders, including the dissident Chandler family, are impatient for the board to take action to raise share prices. Currently, the board is proposing to recapitalize the company, sell off its TV stations and pay a sizeable dividend to shareholders--in a deal where it would also buy out the Chandlers, who hold a 20% stake.

Ultimate credit for the Tribune's five-month non-auction must go to the Chandlers, who began urging the company to initiate a piecemeal sale in mid-2006 as a stratagem to raise the share price. Ironically, they became the unwitting architects of a drawn-out, embarrassing spectacle that highlighted the indifference of other major newspaper publishers--thus lowering, rather than raising, share prices. From a one-year high of $34 in September 2006, share prices fell to a six-month low of $28.99 by mid-March 2007.

Adding to the auction's generally fraught atmosphere, on Friday, the Los Angeles Times reported that its former publisher, Jeffrey M. Johnson, is joining Burkle's Yucaipa Cos. investment firm, which earlier tendered the Tribune bid on behalf of Burkle and Broad.

In September 2006 Johnson and former Times editor Dean Baquet publicly defied Tribune's corporate bosses by refusing to cut the paper's newsroom staff. Both men were later forced to resign. According to the Times' report, Yucaipa denies any connection between Johnson's hiring and the Tribune bid.