Three members oppose Tribune stock repurchase

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CHICAGO (AFX) - Tribune Co. has exposed a rift in its boardroom, disclosing that three key directors opposed a recent decision by the media company to repurchase $2 billion of its shares as a way to boost its slumping stock price.

The Chicago-based Tribune revealed the opposition by the board members appointed by Chandler Trusts, the Chicago-based company's second-largest shareholder, in a filing Tuesday with the Securities and Exchange Commission. The Tribune's daily newspapers, which include the Chicago Tribune, the Los Angeles Times and The (Baltimore) Sun, have faced lower circulation and sluggish advertising growth for years -- as has much of the rest of the industry.

The announced stock buyback last month, which will be financed with bank debt and bonds, underscores the pressures Tribune faces to reverse a decline that has slashed the value of its stock nearly in half in just two years.

That announcement on May 30 sent Tribune's stock up 7 percent. By Wednesday afternoon, the Tribune's share price on the New York Stock Exchange had risen 41 cents, or 1.37 percent, to $30.41. It's five-year high, reached in early 2004, was $53.

In its filing Tuesday, Tribune disclosed that the buyback was approved by eight of its 11 directors. Casting votes against it were Jeffrey Chandler, Roger Goodan and William Stinehart Jr. of Chandler Trusts, which owns 12.2 percent of Tribune's stock.

The brief mention of the board vote in the filing offered no details on the disagreement, saying only that Chandler, Goodan and Stinehart "advised the Company that they do not share the opinions" of the Tribune on the repurchase plan.

The Wall Street Journal reported, citing unnamed sources, that the Chandlers disagreed with Tribune over how to value a pair of complicated partnerships that they jointly own and are concerned about maintaining the tax-efficient structure of the partnerships.

Messages left for Goodan and Stinehart on Wednesday were not immediately returned, and a spokesman for the Chandler Trusts declined to comment.

Tribune spokesman Gary Weitman declined to provide details about the disagreement, but said the company will go ahead with the buyback plan.

"The clear majority of the board considered a broad range of alternatives over many meetings, over many months and decided by a vote of 8-3 to pursue the tender offer in the best interest of all shareholders, and that tender moves forward," he said.

Industry analysts said it was unlikely the dissenters could derail the buyback plan given the majority board support for it.

"Maybe the Tribune's willing to make some modification to keep the peace, but the leverage is with the Tribune because of the votes," Dave Novosel, of Chicago-based Gimme Credit. "My sense is the buyback goes through with some slight modifications."

Another analyst said the buyback may have been a bid by Tribune to thwart any hostile takeover by forcing the stock price up, and the opposition by the three board members could signal their willingness to entertain tenders from outside buyers.

"It may be the Chandler directors are looking for some way to get maximum value for what they own, and the way to do that may be for the company to be taken over by somebody else," said John Morton, an independent newspaper analyst.

But with executives and dissenting board members tightlipped so far about the discord, Morton added it was difficult to assess its root cause or potential impact.

Charlie Bobrinskoy, vice chairman of Ariel Capital Management LLC, a Chicago-based investment firm that owns 3.4 percent of Tribune, said Ariel continues to support the management and board of Tribune and believes the buyback is good for both the company and shareholders. However, he also added: "We believe the program is only the first step in a process of increasing shareholder value."

Tribune will be the third-largest U.S. newspaper publisher, behind Gannett Co. and McClatchy Co., once McClatchy closes its deal for Knight Ridder Inc. It also owns 26 television stations and the Chicago Cubs baseball team.