Tribune Company/ESOP Update
March 3, 2007

There has been more news coverage of the Tribune Company/ESOP story. This article provides an update on the status of the deal:

• Without providing details, Zell confirmed that his plan involves creating an employee stock ownership plan (ESOP) and that the ownership would be "a partnership between myself and the ESOP," Crain's reported.
• Zell acknowledged that his proposal to take over the Tribune may be a long shot, according to Crain's, which quoted him as saying, "There's a long way between the lip and cup here."

Meanwhile, this article provides more background, including the fact that the Tribune Company used to have an ESOP that was “ended” in 2003.

Tribune launched a small ESOP in 1988 and soon expanded it to successfully thwart a hostile takeover by the billionaire Bass brothers of Texas. When the ESOP was shut down three years ago, workers' stock was deposited in 401(k) retirement accounts, a spokesman confirmed yesterday. If that ESOP existed today, its holdings - 18.6 million shares of common stock, according to a securities filing - would make it Tribune's third-largest shareholder, behind the Chandler family of Los Angeles, which owns 20 percent, and the McCormick Tribune Foundation with 13 percent. The company owns Newsday and WPIX/11.

The article includes quotes from J. Michael Keeling, president of the ESOP Association, and Corey Rosen, director of the NCEO. It also mentions some of the other options available to the Tribune Company:

The directors also are weighing the Zell bid against an alternative from top management that would split Tribune's 23 television stations from its 11 newspapers and pay a hefty dividend to shareholders. Other proposals submitted last month by the Chandlers, billionaires Eli Broad and Ron Burkle of Los Angeles and the Carlyle Group private equity firm have been put to the side, for the moment.

This blog discusses some of the alternative options in more detail.

The article then discusses how ESOPs have been used to buy companies and block hostile takeovers. It used Avis Inc. (more background information here and here) as an illustration of a success story, and Charter Medical Corp., which we discussed in this post, as an example of an ESOP that did not work.