Tribune Co.’s largest shareholder offered to buy the struggling media conglomerate and spin off its broadcast division in a deal disclosed Thursday and valued at $7.6 billion.
Tribune directors now will huddle to determine whether the bid by the Chandler family, which came in below what the company once had hoped to receive, or any other offer is worth accepting or whether it should pursue another strategy to boost its sinking stock.
The offer by the Chandlers, which owns 20 percent of Tribune stock, was disclosed in a filing with the Securities and Exchange Commission.
Chicago-based Tribune, the nation’s third-largest newspaper company, had set a Wednesday deadline for submitting offers, but no outside bidder appears to have surfaced who was willing to pay an amount well above the company’s current stock price.
Details about other bids remained unclear, but it was reported that Southern California billionaires Eli Broad and Ron Burkle submitted a proposal that amounts to a recapitalization plan — short of a pure buyout offer. That plan would reportedly put $500 million into the company, along with a debt package that would allow a dividend payment to shareholders. In exchange, Broad and Burkle would get about a 30 percent interest in Tribune and seats on the board.
The Wall Street Journal reported that at least three groups submitted offers.
The Chandlers are offering $19.30 per share in cash as well as stock in a spin-off, Tribune Broadcasting, which would include the company’s broadcasting and entertainment operations. Combined, the value to shareholders would be $31.70 a share, just 4.5 percent above Tribune’s closing price of $30.34 on Wednesday.
But the Chandlers said their offer, which expires Jan. 31, is about an 18 percent premium over what the company would have been trading at absent takeover speculation. They cited a recent Merrill Lynch report estimating that Tribune’s unaffected stock price would be $27 per share.
Prudential analyst Steven Barlow said he thinks there’s a 50 percent chance Tribune will reject it.
“I think we have a lot of shareholders who may think this is too cheap,” he said. “My view for today was take your money and run. The stock is up today. There’s a lot of uncertainty.”
Dave Novosel, an analyst for the bond research firm Gimme Credit, said he doubts the board will find either the Chandlers’ offer or the Broad-Burkle proposal very compelling, suggesting that further negotiations over the proposals are likely.
“Apparently investors were not stumbling over one another to get their bids in for Tribune,” he wrote in a research note. “Interest in the auction of the company was far less than expected, reflecting the sorry state of affairs in the newspaper industry.”
A Tribune spokesman did not immediately return messages seeking comment. Messages left for representatives of Broad and Burkle also were not returned.
Despite initial hopes the so-called auction might draw a bid from a deep-pocketed private equity firm or another media giant, preliminary bids were weak and the deadline was extended by two months.
Tribune holdings include the Los Angeles Times, Chicago Tribune and nine other daily newspapers; 23 television stations; Internet ventures; the Chicago Cubs baseball team, and sizable stakes in the Food Network and the CareerBuilder online classified advertising venture.
The Chandlers said in the SEC filing that they would own 51 percent of Tribune after the deal closed and the remaining 49 percent would be held by two private equity firms, whose names were not disclosed.
Debt financing for the Chandler bid would be provided by affiliates of Goldman Sachs, Merrill Lynch and Citicorp, according to the filing.
Tribune’s stated timetable for a decision on its direction remains sometime between now and the end of March. The Chandlers said their offer, if it is accepted and receives shareholder and regulatory approval, will take about six months to complete.
Tribune said in September that it was willing to sell all or part of its assets following pressure from some of its largest shareholders, including the Chandler family, who were disappointed with the company’s lagging stock price and slumping fortunes.