• by Erik Sass , April 2, 2007

The drawn-out auction of the Tribune Company took another unexpected turn on Friday, just a day before the company's self-imposed March 31 deadline for a decision. Ronald Burkle and Eli Broad--two Los Angeles billionaires whose earlier offer of $27 a share was apparently rejected--offered a revised bid of $34 a share. Although their new proposal beats Chicago real-estate mogul Sam Zell's on several counts, it's unclear whether it will involve a buyout of shares held by the Chandlers, a powerful family that wants to divest itself of its 20% stake in Tribune.

The billionaires' bid ups the ante by $1 per share over Zell's offer of $33, and they come out ahead of Zell in their promise to invest $500 million of their own money in the company, versus Zell's $300 million. The Broad, Burkle team took a page from Zell's playbook by proposing a significant employee stock ownership plan that would control 60% of the stock.

The billionaires have presumably also promised not to break up the company, as has Zell--a condition set by the board of directors, which wishes to keep Tribune's holdings intact. Originally, Burkle and Broad wanted to acquire just the Los Angeles Times, implying that a breakup of the company was possible. The company also owns the Chicago Cubs, 22 TV stations, and a stake in CareerBuilder.com, a network of online newspaper classifieds.

The key element of any successful bid, however, is allowing the Chandler family to sell their Tribune stock at a profit--or at least break even with the share price when the sale began in mid-2006.

The family is already set to take a substantial hit, due to the long-term decline in the company's stock price. On December 31, 1999--three months before the family acquired its 20% stake in Tribune when it sold the Times Mirror to the company--the stock price was $55.06. By September 2006, the price had fallen to $34, prompting the Chandlers to demand action from the board to raise prices--if necessary, by auctioning the company off piecemeal. The plan has backfired, greeted by lukewarm interest that underscores Tribune's problem. Stock prices were subsequently driven down further, to $32.11 at press time on Friday.