updated 9/22/2006 9:22:07 AM ET 2006-09-22T13:22:07

Directors of Tribune Co., under pressure from shareholders to boost its stock price, are signaling they may sell, break up or take private the company that owns the Chicago Tribune, the Los Angeles Times, television stations and the Chicago Cubs.

The company said late Thursday after a special board meeting that it intends to make potentially transforming changes by the end of the year.

The first move was to restructure two complex partnerships with the Chandler family that were a legacy of the 2000 takeover of the parent company of the Los Angeles Times. That clears the way for a new board committee of seven directors to work with Dennis FitzSimons, Tribune’s chairman and CEO, on the makeover plan.

The short timeframe suggests the company, whose revenue continues to drop amid newspaper circulation declines, will move quickly beyond the plan it outlined in May calling for a combination of select asset sales, a $2 billion stock buyback and further cost cuts.

The Chandler partnerships had been widely expected to be dissolved following negotiations between the company and the Chandler Trusts.

Instead, the Chandlers will retain 95 percent interest in the partnerships and will increase their holdings of Tribune common stock to approximately 48.7 million shares from approximately 36.9 million, Tribune said in an evening statement.

The partnerships contain some $3.5 billion in assets and have hampered Tribune’s ability to make transactions because of major tax consequences.

“The restructuring of these partnerships frees the company to move quickly to pursue strategic alternatives to further enhance shareholder value,” said FitzSimons.

A rift between the two sides surfaced last spring when the Chandlers, who hold three board seats, criticized the buyback strategy and called for the company’s breakup. In evidence those differences have been patched up, Warren Williams, chairman of the Chandler Trusts, said Thursday night that the trusts “will now work collaboratively with management and the board to build value for all shareholders.”

The two partnerships were created in 1997 and 1999 by the Chandler Trusts and Times Mirror Co., which Tribune acquired in 2000.

In an e-mail to employees late Thursday, FitzSimons said the restructuring simplifies the company’s capital structure by eliminating all preferred stock and has no impact on Tribune’s earnings. He added: “We’re making solid progress on many fronts, and your efforts are appreciated.”

The company said it expects to record a one-time gain of approximately $45 million as a result of the transaction.

Under the terms of the restructuring, Tribune will receive distributions of all of its preferred stock — which currently is owned by the partnerships — and approximately 39.5 million shares of the 51.3 million Tribune common stock held by the partnerships.

Tribune also will receive the right to acquire the real estate owned by the partnerships in January 2008 for $175 million. The partnerships currently own real estate used by the Los Angeles Times, Newsday, Baltimore Sun and Hartford Courant newspapers, and various other investments.

They enabled the Chandlers to diversify their Times Mirror holdings through a tax-free swap of family stock for company assets, but only preserved the tax benefits if they stayed intact for seven years — a period that expired this month.

Named to the special board committee were directors Enrique Hernandez Jr., Betsy Holden, Robert Morrison, lead independent director William Osborn, J. Christopher Reyes, Dudley Taft and Miles White.

The strategy FitzSimons unveiled May 30 has lifted the company’s stock about 15 percent, including Thursday’s 4 percent rise. But since he took over the top job in January 2003, the stock has declined about 30 percent.

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