Tribune calls share buyback successful

CHICAGO (AFX) - Tribune Co. declared its contested stock buyback plan a success Tuesday, announcing that stockholders tendered most of the shares it sought despite outspoken opposition by the Chandler family -- now its largest shareholder.

The response by shareholders indicated the media company prevailed in round one of its public feud with the Chandlers, who had urged it to take more drastic action.

Wall Street endorsed the outcome, driving Tribune's stock up sharply even on a down day in the markets. Shares in the newspaper and TV station company rose $1.57, or 5.1 percent, to $32.47 on the New York Stock Exchange after reaching $32.75, just shy of a seven-month high.

But the Chandlers warned that the battle over the company's future direction is not over. The Los Angeles-based family trusts, whose 36.9 million shares now comprise a more than 14 percent stake, pledged to continue their efforts to bring about "positive change for the benefit of all Tribune stockholders."

"We, like many other non-tendering stockholders, believe there is greater value to be realized through prompt and meaningful strategic action," the Chandler Trusts said in a statement.

A family spokesman who declined to be identified called the buyback undersubscribed, noting that Tribune fell short of the 53 million shares it sought and had to pay at the high end of its offer range of $28 to $32.50 per share. He would not elaborate on what action the family might pursue, such as seeking alliances with other shareholders.

Tribune Chairman and CEO Dennis FitzSimons said the company was pleased with what he called the successful conclusion of the tender offer.

"This leveraged recapitalization represents a very meaningful step in our plan to enhance value for shareholders," he said. "Now, our priority is to improve operating performance through a combination of top-line growth initiatives and additional cost savings. We'll also continue to move forward on dispositions of noncore assets."

The buyback plan prompted a bitter public split between Tribune and the Chandler family, which sold Times Mirror Co. to Tribune in 2000 and has three seats on the board of directors.

Tribune said it expects to acquire all 45 million common shares tendered -- about 15 percent of all outstanding shares -- during the four-week offer period that expired Monday night at $32.50 apiece. That represents about a 5 percent premium over Monday's closing price.

Two phases of the buyback remain. Under terms of purchase agreements with the McCormick Tribune Foundation and the Cantigny Foundation, Tribune will buy back 10 million shares on July 12 at $32.50. The company said it also plans to repurchase up to an additional 20 million shares, or 8 million more than originally planned, in the open market beginning on or after July 12.

Once those moves take place, the Chandlers' ownership percentage in a diminished pool of outstanding shares will be even larger. That could give them more leverage to push for a spinoff of assets or sale of the company, as they have proposed.

"The fact that the tender came in below expectations indicates to us that investors are expecting additional actions by the company to realize value," said Lisa Monaco, an analyst for Morgan Stanley, in a note to investors. "These could include a restructuring of the company (including a spinoff of the broadcasting business), an outright sale of the company, and/or management changes."

But some analysts see difficulties in achieving those scenarios.

"We do theoretically see upside if the company could be sold as a whole (at close to $50 per share), but cannot identify a potential buyer," wrote Merrill Lynch analyst Lauren Rich Fine. "Further, there is some upside if Tribune were to sell its assets individually, but a large tax bill would be incurred."

Ariel Capital Management, whose 5.2 percent stake makes it the biggest Tribune shareholder without ties to management or the Chandler family, voiced its support for the company's strategy. John Miller, the Chicago firm's portfolio manager, noted that the stock was trading around $27 a share before the buyback was announced last month.

"We're quite happy seeing where the stock is, though we do feel the stock is still significantly undervalued," Miller said. "I believe in Dennis and the board that they will enhance shareholder value over time."

In addition to the $2 billion buyback plan, Tribune plans to sell at least $500 million in noncore assets as part of its strategy. The company, which owns 11 daily newspapers, 26 television stations and the Chicago Cubs baseball team, already has announced deals to sell two of those stations. Copyright 2006 Associated Press. All rights reserved. This material may not be

Copyright 2006 AFX News Limited. All Rights Reserved.