Tribune takeover (subplot: Big business affects you when you least expect it)

[SF_Express]

Tomorrow might be a huge day in our business if it's announced that Sam Zell's bid for Tribune is going to be accepted. Tribune would then be taken private, and who knows beyond that? So this thread should be about that generally.

But I'm reading the story just as a guy who's interested in the business, and it takes me a minute to realize that this could have an effect on me, even though I'm 12 years removed from any involvement with any part of the company. Because I used to work for an old Times Mirror paper and have a modest (couple of hundred bucks a month) pension coming to me eventually. And I'm sure there are quite a few people who frequent this place who are in the same situation.

Thing about that is that old ESOP program is likely going to be one of the major sources of funding if this deal goes through; there's about $1.76 billion in the plan:

http://www.latimes.com/business/printedition/la-fi-esop29mar29,1,6901191,full.story?coll=la-headlines-pe-business

So unless I'm reading it wrong (and Frank, given your acumen in such things, I'd be interested in your opinion), I'd be a partial owner in the new company, as will all former Times Mirror employees with a pension coming.

From what I can tell, this would put that pension at risk. Although if you get to the bottom, I guess it could also RISE in value, which it had no chance of doing the way it is now.

Like I said, this goes well beyond that. Tribune going private would be a huge story in our business. And a lot of people need to pay attention tomorrow; even those who haven't worked for Times-Mirror or Tribune in years.

 

[Bob Cook]

Keep in mind that Zell is the prototypical vulture investor who takes over distressed properties and gussies them up for a big sale. Zell calls himself a "grave dancer." He's going into this to make money, so who knows what he'll try. Or whether it'll work. He's putting up $300 million of his own money, which is small compared to the size of the deal, but it's rare to see someone put up his own cash. Then again, Zell just sold his real estate company for $39 billion.

 

[Frank_Ridgeway]

(and Frank, given your acumen in such things, I'd be interested in your opinion)

No, this is way out of my league. I haven't a clue.

NYT has a story, too. It calls the ESOP "risky."

http://www.nytimes.com/2007/03/29/business/media/29paper.html?_r=2&ref=business&oref=slogin&oref=slogin

 

[SF_Express]

My little stake in this is a piddling couple of nickels compared to current employees. Have a lot of friends and former colleagues there and really hope it all works out for them.

 

[fishwrapper]

The ESOP plan is risky for a couple of reasons:

1-The rise and fall of the stock price affects the relative wealth of employees and former employees. Their pensions and 401k holdings which contain company stock are affected, obviously. The paradigm for this business model is Southwest Airlines.

2-The "Zell Plan" is riskier for another reason. It puts the company further into debt. Instead of satisfying Wall Street, the Tribune Co. will be satisfying loans. And having a company with one of its main objectives being debt service is always risky.

So, calling this a "private" takeover or acquisition is quite the misnomer.

 

[Bob Cook]

The ESOP plan is risky for a couple of reasons:

1-The rise and fall of the stock price affects the relative wealth of employees and former employees. Their pensions and 401k holdings which contain company stock are affected, obviously. The paradigm for this business model is Southwest Airlines.

2-The "Zell Plan" is riskier for another reason. It puts the company further into debt. Instead of satisfying Wall Street, the Tribune Co. will be satisfying loans. And having a company with one of its main objectives being debt service is always risky.

So, calling this a "private" takeover or acquisition is quite the misnomer.

It's private in the sense the company is being taken private. But it's an Ivan Boesky-classic leveraged buyout, which has become all the rage in various industries these days. Though Zell is hardly the only one coming up with a big debt plan -- didn't Tribune try, or plan to try, borrowing enormous amounts of money for a stock buyback? I believe the debt TribCo was planning was not much less than what Zell is bringing in.

 

[fishwrapper]

If you're referencing the Stock Repurchase Plan: That plan was already executed. One billion dollars. Brings overall debt to two-plus billion dollars. Zell's plan will take the debt over four billion, which is more than half of the worth of the company.
Having 50% of the company's worth tied up in debt doesn't sound dangerous to you?

 

[Starman]

Re: Tribune takeover (subplot: Big business affects you when you least expect it

Tomorrow might be a huge day in our business if it's announced that Sam Zell's bid for Tribune is going to be accepted. Tribune would then be taken private, and who knows beyond that? So this thread should be about that generally.

But I'm reading the story just as a guy who's interested in the business, and it takes me a minute to realize that this could have an effect on me, even though I'm 12 years removed from any involvement with any part of the company. Because I used to work for an old Times Mirror paper and have a modest (couple of hundred bucks a month) pension coming to me eventually. And I'm sure there are quite a few people who frequent this place who are in the same situation.

Thing about that is that old ESOP program is likely going to be one of the major sources of funding if this deal goes through; there's about $1.76 billion in the plan:

http://www.latimes.com/business/printedition/la-fi-esop29mar29,1,6901191,full.story?coll=la-headlines-pe-business

So unless I'm reading it wrong (and Frank, given your acumen in such things, I'd be interested in your opinion), I'd be a partial owner in the new company, as will all former Times Mirror employees with a pension coming.

From what I can tell, this would put that pension at risk. Although if you get to the bottom, I guess it could also RISE in value, which it had no chance of doing the way it is now.

Like I said, this goes well beyond that. Tribune going private would be a huge story in our business. And a lot of people need to pay attention tomorrow; even those who haven't worked for Times-Mirror or Tribune in years.

You don't seriously think Zell or any of these other corporate cannibals gives two ****s about your pension, do you??

Other than how he can sink his fangs into it and get his hands on the money, that is. As far the Wall Street vampires are concerned, we can all go work at Wal-Mart when we're 87 years old.

 

[SF_Express]

You don't seriously think Zell or any of these other corporate cannibals gives two ****s about your pension, do you??

No, not at all. But wasn't there some legislation and passed and signed by Bush late last year or early in 2007 that protected pensions in some way or another?

 

[ondeadline]

I know the debt is bad. But at least if the company is private, would it perhaps take a long-term view of things rather than a daily concern about fluctuations in the stock price?

 

[SF_Express]

I know the debt is bad. But at least if the company is private, would it perhaps take a long-term view of things rather than a daily concern about fluctuations in the stock price?

That would be the hope, of course. Unless Sam Zell is looking to make big money out of this.

 

[MileHigh]

Be wary of private ownership. See Philadelphia. Not saying that Tribune is this bastion of great newspaperdom, but nothing is perfect. No doubt, it's going to be interesting to see how this all plays out. These aren't little papers we're talking about.

 

[BTExpress]

Re: Tribune takeover (subplot: Big business affects you when you least expect it

No, not at all. But wasn't there some legislation and passed and signed by Bush late last year or early in 2007 that protected pensions in some way or another?

From what I have been told, the Tribune pensions are safe because they are tucked away in some other entity somewhere.

Which kind of makes sense because pensions haven't been an issue for almost two decades. Anyone hired in 1990 or later got an ESOP in lieu of a pension.

Only dinosaurs like me (hired in 1986) get pensions in addition to the current retirement plan.

 

[Bob Cook]

I know the debt is bad. But at least if the company is private, would it perhaps take a long-term view of things rather than a daily concern about fluctuations in the stock price?

That would be the hope, of course. Unless Sam Zell is looking to make big money out of this.

I don't imagine Sam Zell doing this for any other reason than to make big money out of this. And as to an earlier poster, yes, 50% of the company in debt is not a good thing. So instead of making cuts and changes to satisfy shareholders, the new TribCo would be making cuts and changes to satisfy bondholders. If all goes well for Zell, the Trib makes a lot of money and allows him to pay down the vast majority of the debt with money raised from the next IPO. If it does not go well for Zell, he's stuck paying the bonds, which get downgraded based on the company's performance. Either way, I would not look at this situation as any better or worse than public ownership. Just different masters to satisfy.

 

[ondeadline]

It seems like the safest places to work these days are family-owned papers. The problem is that there aren't that many of them.

 

[SF_Express]

No, not at all. But wasn't there some legislation and passed and signed by Bush late last year or early in 2007 that protected pensions in some way or another?

From what I have been told, the Tribune pensions are safe because they are tucked away in some other entity somewhere.

Which kind of makes sense because pensions haven't been an issue for almost two decades. Anyone hired in 1990 or later got an ESOP in lieu of a pension.

Only dinosaurs like me (hired in 1986) get pensions in addition to the current retirement plan.

Well, maybe I shouldn't use the term "pension." What I have IS an ESOP account, that starts paying out like a pension when I retire...It's not a 401K...

 

[fishwrapper]

It seems like the safest places to work these days are family-owned papers. The problem is that there aren't that many of them.

Santa Barbara is hiring.

 

[BTExpress]

Re: Tribune takeover (subplot: Big business affects you when you least expect it

Well, maybe I shouldn't use the term "pension." What I have IS an ESOP account, that starts paying out like a pension when I retire...It's not a 401K...

Is that account locked into company stock, with no chance to move it somewhere safer?

 

[Gold]

a couple of things:

first, SF Express, see if you can roll that over into something else if you aren't sure. I don't know the exact details of your situation, but often you can make what is called a trustee-to-trustee transfer which avoids a penalty. Perhaps you can move the funds to a fund based on the overall markets, which might be more secure than having things in just one company.

Second, there may be added debt but maybe Zell, who is a real estate guy, is looking at it as a situation where the sum of the parts is greater than the whole. You sell of what you don't want to keep.

A lot of you may instinctively think of the Tribune as a newspaper company, but when you think about it for a minute the Tribune company is as much, if not more, of a broadcasting company. The same might also be said of Belo, which owns the Dallas paper but I think they own more television stations than daily newspapers. The Tribune Company owns stations in at least the three largest markets, and there may be a lot of valuable real estate - I haven't looked at the annual report or the holdings, but that is something to think about.

 

[SF_Express]

Well, maybe I shouldn't use the term "pension." What I have IS an ESOP account, that starts paying out like a pension when I retire...It's not a 401K...

Is that account locked into company stock, with no chance to move it somewhere safer?

Correct...that's why I refer to it as a pension, because that's how it acts. It's a leftover from the old Times-Mirror days.

By the way, it never occurred to me we might be Express brothers, seems like I should have noticed sooner.