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Will Tribune Sale DecisionArrive on April Fool’s Day?**Oops, It Came a Day Later

Posted Sep 12 2008 6:49pm

It’s ironic that the sale of the Tribune Company may be decided sometime today – the ultimate April Fool’s joke. Even if the sale is completed today, tomorrow or next week, it may be months or years before we discover who the actual Fool is.

Will it be billionaires Eli Broad and Ron Burkle for thinking the Chicago-myopic management team would actually consider two Angelinos over a home-town favorite? Is it Sam Zell, who is investing at least $300 million of his own cash to buy into a declining industry? Is it for all them for thinking they have a clue about running a complex media company? If I hear it’s just like any business one more time, I’m going to scream…

Are the fools the folks willing to help the billionaires in their highly-leveraged buyout scheme? And who are these people, anyway? Do they read newspapers?

Or maybe the fools are the Chandlers and other directors who are forcing the sale of Tribune in the first place. After all, newspapers historically struggle financially whenever the economy is doing its best. That’s because advertisers feel confidant they don’t need to feed the local monopoly anymore.

But if my sometimes faulty memory is correct, the newspaper industry experienced a similar slump in the late 1980s just as the housing market climaxed. Then – as car dealers tried to unload luxury cars, grocery stores fought for every customer, and furniture stores were desperate to unload overcrowded showrooms – newspaper advertising jumped.

Consumers bought more newspapers as the economy worsened, hungry for help wanted sections and news on the economy. The question becomes, will Internet sites such as Craig’s List and continue to siphon off ads and readers when the economy sinks into the abyss? Or will local businesses begin to realize that a large number of Americans don’t regularly use computers?

Regardless of who turns out to be the fool, the end-losers will be Tribune employees, especially if they’re forced into an Employee Stock Ownership Program. If you don’t remember what happened to United Airline employees, just read this story in The Chicago Tribune. Think of this whole business as a sub-prime loan for the newspaper industry.

Even if not forced into an ESOP, any sale of the company will require such enormous debt that employees will be saddled with a management desperate to increase revenues at any cost to pay down interest much less principal. Increased revenues would be the preferred way to pay down this extra burden, but more likely, management will continue to cut costs. And more of my industry friends will suffer because of Fools who don’t know how to manage the newspaper industry.

The Tribune Company is making a bid for more money from Sam Zell at the last minute, reportsThe Associated Pressvia Editor and Publisher. Either it’s a bold move or the Tribune Board will be labeled Fools for sending Sam packing. Remember, just a few months ago, the Tribune Company couldn’t find any serious takers. Here is a more detailed story inThe New York Times. (I have had trouble accessing the Chicago Tribune website all day. Hmmm, coincidence?)

The Chicago Tribune announces that Sam Zell has purchased the company with an surprise caveat: If Eli Broad and Ron Burkle come up with a better offer, the company can upgrade to the better deal.

I think this paragraph in the Tribune story sums up my feelings:

Even some industry rivals are dumbfounded by what Zell has planned. "The amount of debt Tribune is going to have blows my mind," said one of them, noting that he's expecting three years of cash flow declines as once-loyal advertisers rush to get online.

Later tonight I will post my tips, suggestions and warnings for Sam.

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