Chicago real estate tycoon Sam Zell has emerged as the successful suitor in lukewarm bidding for the Tribune Company, owner of 11 daily newspapers, 23 television stations and the Chicago Cubs.
The Chicago-based media company announced Monday it will pay shareholders $34 a share to go private, relying on a complicated arrangement that uses employees' retirement funds to borrow billions of dollars. The Cubs are to be sold to help pay down debt.
While the company's future path appears to be clearer, what it means for Tribune journalists remains murky. Executives told employees Monday that they should expect serious additional job cuts – perhaps within the next two months.
If the deal goes through as planned, billionaire Zell will wind up with a controlling minority stake in Tribune, even though he is putting up just $315 million of his own money for a company valued at $8.2 billion.
The Tribune Company owns some of the most distinguished newspapers in the business, including the Los Angeles Times, the Chicago Tribune and the Baltimore Sun.
But like other newspaper companies, Tribune has suffered as advertisers have migrated to the Internet. Shareholders forced a sale.
Howard Schneider, the former editor of the Tribune paper Newsday, says taking the company private protects the papers from investors' complaints. But Schneider says there's no guarantee of a happy ending.
"If the newspapers continue to erode, if serious journalism is not supported, then I think this will be a terrible move," Schneider says.
The Tribune Company eliminated Newsday's foreign bureaus and most of its Washington reporters, and Schneider left the paper over related budget cuts.
"My former colleagues have been caught in a spiral that continues to say the only way we can continue our profit margins is to cut good journalism," he says. "And that is, to me, a death spiral."
Zell, who is to become The Tribune Company's new chairman, was not available for comment.
Los Angeles Times publisher and former Tribune Company executive David Hiller says some of the expected job cuts are needed simply to help prop up the bottom line. But he says he's bullish on private ownership, which will also allow him to use some of the savings to create new jobs for his paper's Web site.
"You can do it and make smart decisions without being in the minute-by-minute public glare of Wall Street," Hiller says.
Zell has said he sees the company as an investment — and isn't particularly interested in the news business. That's a very different sentiment than the one expressed by Chicago Tribune metro columnist Mary Schmich.
"Let me just say, I don't feel like I work for a company," Schmich says. "I don't work for Tribune Company. I work for the Chicago Tribune."
The deal hinges on what's called an "employee stock-option plan" — a complicated arrangement that would use retirement funds to help borrow the money needed to buy out shareholders. While details haven't been fleshed out, employees could benefit if the company's revenues improve. But there's a risk: Their retirement funds could suffer, too.
The Tribune Company's current management will stay in place, at least for now. But Schmich says there are many people in Chicago who are still angry that the Tribune Company's leadership decided to buy the Los Angeles Times and its sister papers back in 1999.
"I think that there are a fair number of people who feel that it reached too far, that it grasped too much, and that this contributed to bringing us down," Schmich says.
Some of those papers acquired by the Tribune Company were prestigious, but also in less-profitable markets than those already owned. But Hiller, who helped review the purchase of the former Times-Mirror Company for Tribune, says the company's struggles have far more to do with larger trends in the industry.
As the Internet has diverted subscribers and advertisers, deep cuts have ensued at Tribune papers; they led to a mutiny in the executive suites of the Los Angeles Times.
"There's been a lot of turmoil in the upper management of the newsroom," says Dan Neil, a Pulitzer Prize-winning columnist at the Times. "Obviously, we've lost publishers, and we've lost some very great executive editors."
In fact, the past two publishers and past two top editors at the Los Angeles Times were forced out — or left — after ruptures with their Tribune Company bosses over budgets.
Neil says the hope at the Times is that Zell will decide to sell it off.
"And then, in kind of an ironic way, we return to a previous era of publishing, when we were dealing with locally owned, locally invested publishers," Neil says. "It sort of takes us back to the Chandler era."
The late Otis Chandler, of course, was the legendary publisher and owner of the Los Angeles Times. But it's not clear the Times is for sale — and publisher Hiller says he's been given no indication that it will be.
Two Los Angeles billionaires who say they are attracted by the public service of journalism – Ron Burkle and Eli Broad – joined forces to bid for Tribune, too. But they didn't promise to keep the current executive team at the helm, and their bid seemingly came up short.
Even so, the Tribune Company would only have to pay a $25 million penalty if it chose to unravel the new deal. That may give Burkle and Broad one last chance to sweeten their offer.