Proposed Transaction to Structure a Buyout Around an ESOP
February 27, 2007

In a September 21, 2006 press release, the Tribune Company announced the following:

“That its board of directors has established an independent special committee to oversee management’s exploration of alternatives for creating additional value for shareholders”

The special committee has been looking at ways to restructure or sell the company. A proposal to structure a buyout around an ESOP has been in the news. The proposed deal “trumps two other private bids -- a $7.6 billion ($31.70 per share) offer from the Chandler family, the company's biggest shareholder; and a $34.00 per share offer from billionaires Ronald Burkle and Eli Broad -- that the company had already indicated it considered insufficient.”

Here are some highlights of the proposed transaction from this article:

• “It would create a privately held, highly leveraged company that would be able to take advantage of federal tax breaks associated with ESOPs to provide a "a bigger payoff" to existing shareholders than the other restructuring options being studied by the Tribune board, one of the sources said.”
• “Details of Zell's proposal were sketchy Friday. But one source said the Chicago billionaire's private firm and an ESOP would team up to purchase Tribune's shares and keep the company largely intact for now, including keeping management in place.”
• “Zell's deal would present a high risk but potentially high reward proposition for Tribune employees. Their retirement nest eggs would be concentrated in a new company with a large amount of debt. But if the newspaper and local TV industries turn around, employees would stand to reap big returns Tribune, which owns the Chicago Tribune, saw its revenues drop by 5 percent in January.”