Maybe Tribune Co. can still get its stock back up. Maybe it could stem circulation woes and sluggish revenue growth and disappointing earnings. Maybe it could even resolve its differences with the Chandlers.
Somehow, though, I doubt it. Saturday’s intriguing L.A. Times story about the continued interest by billionaires Eli Broad, Ron Burkle and David Geffen, coupled with Tribune’s noticeable softening about a potential sale, suggest that the paper eventually will be put on the block, perhaps as part of a wholesale dismantling. It probably won’t happen next week or next month or even by the end of the year, but at some point the benefits of breaking up the company – and along with it selling the Times – will become too reasonable to dismiss. And if senior Tribune executives don’t see the light, the company’s institutional shareholders surely will. The Tribune response to overtures by Broad, Burkle and Geffen – “If our perspective changes we will contact you” – suggests that the board is beginning to recognize its fiduciary responsibility to shareholders. In other words, anything is for sale at the right price.
In the eyes of Wall Street, Tribune has become damaged goods – not just because of its poor numbers, but because of its confused turnaround strategy and its squabbling with the Chandlers and its inability to transition into a more Web-savvy media company. That’s a lot of headaches to correct at a time when the overall economy is slowing and stock traders are afraid of their shadows.
Goldman Sachs analyst Peter Appert told the Chicago Tribune a couple of weeks ago that Tribune Chief Executive Dennis FitzSimons was “in an impossible situation,” noting that the Chandlers and Wall Street are “breathing down his neck.”
I suppose it’s not out of the question that Tribune can get back on its feet. Look at the big airlines – a year or two they were left for dead, with losses running into the billions. This week, when they report second-quarter financial results, the numbers will be pretty good. Even United Airlines is expected to report an operating profit (never mind it’s at the expense of packed planes, late flights and an angry customer base). If United can hang in there, you would think that Tribune can, too.
The difference is that the airlines didn’t have interested and well-funded buyers waiting in the wings. Tribune has an alternative for its shareholders, and after Saturday’s Times story, the pressure to cut a deal will only intensify.
There are a couple of caveats here. If Tribune holds off until next year and the economy sours significantly – at this point a pretty decent bet – Broad, Burkle and Geffen will probably want a reduced price for the Times. These are extraordinarily successful businessmen and they’re not just buying the paper out of the goodness of their hearts. They want to make a few bucks. If Tribune balks at going lower, the whole thing may come apart.
Another recipe for disaster: If a couple or more of the billionaires join forces. Warren Buffett and Bill Gates notwithstanding, billionaires usually don’t work all that well together. When you’re the wealthiest guy in the room, you get to call the shots. When there are two or three of you, the room gets crowded. Purchasing a newspaper – a world-class one at that – isn’t like investing in a chipmaker or burger chain; there’s ego and emotion that could kill the deal before it even takes shape.
All that said, I’m beginning to think that a sale is going to happen – most likely within the next 12 months. The financial resources are ready and waiting, the revenue numbers are going nowhere fast, and the desire for change is just too powerful.