By Ben Klayman
CHICAGO (Reuters) - Tribune Co. shareholders overwhelming approved a proposed $8.2 billion buyout led by real estate tycoon Sam Zell on Tuesday, giving a boost to the publisher amid investor fears that a deteriorating credit market would hamper the debt-heavy deal.
The company said 97 percent of votes represented by proxy favored the deal. Two percent opposed and 1 percent abstained.
Shares in the company rose 3.6 percent to close at $27.98, short of the $34 a share offered to shareholders, but above the nine-year low the shares hit last week.
Tribune, publisher of the Los Angeles Times and the Chicago Tribune, is going private under an agreement that will restructure it as an employee-owned company. Under the deal Zell would pay $315 million and get the option to buy a 40 percent stake in the company.
"If you were asked your opinion -- should I vote for something that would give me $34 for something currently valued at $27, what would your choice be? I can't believe that 2 percent opposed," Barrington Research analyst James Goss said.
The shareholder vote in Chicago took on an added significance for the deal, which calls for Tribune to take on $8.4 billion in new debt.
Some investors have questioned whether the deal's financing terms would have to be renegotiated due to the company's weak performance and deteriorating newspaper and credit markets.
Tribune Chief Executive Dennis FitzSimons said the terms remain unchanged. Zell said he continues to back the deal.
"I believe Tribune Company is reasserting itself as a national leader in news generation and distribution," Zell said in a statement. "Despite the recent upheaval in the credit markets, my view of the company as an investment has not changed."
SHAREHOLDERS QUESTION ZELL EXIT
Shareholders and employees at the meeting asked whether terms of the deal would allow Zell to back out easily.
"There is some risk involved in this deal. This is not a slam dunk," said George Tedeschi, a member of the International Brotherhood of Teamsters union and a Tribune shareholder.
But FitzSimons said a clause in the agreement providing an exit "was tightly written" and referred to a significant adverse effect to the whole industry, not just Tribune.
"It does relate to the industry performance, so we don't anticipate, nor do our financing sources anticipate, an invocation of that clause," FitzSimons told about 100 shareholders and employees ahead of the vote tally. "We feel we are within the bounds of the clause as it is written."
Remaining hurdles include getting approval from the U.S. Federal Communications Commission regarding cross ownership of newspapers and broadcast outlets in the same markets.
FitzSimons said the deal was expected to close in the fourth quarter, pending regulatory approval, and that Tribune did not plan to sell additional newspapers.
He reiterated that Tribune plans to sell the Chicago Cubs baseball team. Some analysts have said the team, along with the Wrigley Field ballpark and other assets, could attract bids topping $1 billion.
FitzSimons said the company is appraising its real estate holdings, some of which have "appreciated considerably."
Tribune will also get another opinion in the fourth quarter on the company's solvency, a key test for obtaining financing.
Though the test is routine, it could raise new questions about Tribune's financial health, said Gimme Credit analyst Dave Novosel. He said that it was unlikely that any would be significant enough to jeopardize the deal.
Tribune got an earlier solvency opinion after the buyout was initially announced in April.
Under the deal, Tribune will become privately held, with an employee stock ownership plan owning most of the company, giving Zell a creative way to fund the deal as well as tax benefits.