Video: Paper cuts

By Jerry Cobb Reporter
CNBC
updated 6/19/2006 4:14:44 PM ET 2006-06-19T20:14:44

A good old fashioned proxy battle is shaping up at Tribune company, as the legendary Chandler family of Los Angeles tries to break up the company that bought the family business.

Six years after selling the Los Angeles Times and the rest of its media empire to Tribune Company of Chicago for $8 billion, L.A.'s powerful publishing family is unhappy with the company's poor performance.

With 12 percent of the company's stock and three seats on the board, the Chandlers say shareholders would be better off with a breakup -- selling or spinning off assets like Tribune's portfolio of 11 newspapers and its collection of television stations.

"These are very salable assets,” said Edward Atorino, a media analyst at The Benchmark Co. “The company was put together through acquisition. And it could be taken apart by divestiture and yield what some people on Wall Street feel -- and I would concur -- is worth more than $40 a share."

Tribune's management says it's already considered and rejected splitting up the company.  Instead, the plan is to cut costs and buy back $2 billion worth of company stock. So far, the Chandlers are alone in calling for a change of course. But other shareholders could join them if Tribune's current strategy fails to improve company performance.

"Tribune will probably be faced with a situation where this turmoil will cause them to reevaluate a number of steps that they've taken," James Goss, an analyst who follows the industry at Barrington Research.

Adding to the pressure on Tribune, Hollywood heavyweight David Geffen, former baseball commissioner Peter Ueberroth and several other big names in southern California are each said to be interested in buying back the Los Angeles Times from the company, despite all the huge challenges in running a newspaper today.  

"Owning a major media property goes beyond economics,” said Atorino. “You are a powerful force in a city or a community.  Freedom of the press, television, show businesses: it's not just money."

Ultimately, it will be up to Tribune shareholders to decide whether to stick with current management or break the company in pieces. Private equity firms may also have a role to play in this drama, especially if they side with the Chandlers.

© 2012 CNBC, Inc. All Rights Reserved

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