Wednesday, June 28, 2006

Fight Over LAT Future Will Go On, After Tribune Buyback Falls Short

As the Wall Street Journal noted this morning, the Tribune Company's stock buyback offer ended yesterday with "weaker-than-expected shareholder participation," and the Chandler family fight against the cost-cutting and debt-assumption strategies of CEO Dennis FitzSimons will go on.

Altogether, 85% of the shares in Tribune were not offered, even though the Tribune Co. ended up paying the top price of $32.50 a share it had offered in the buyback. Not only the Chandlers but other big institutional investors in Tribune did not accept the tender offer.

Although FitzSimons now says the Tribune will buy 20 million more shares on the market, the price will almost certainly be above $32.50, as the recalcitrant investors' bet on a higher stock price is fulfilled. This means even more debt for Tribune, if, indeed, the buyback does continue. Should Tribune Co. realize its buyback goals, the Chandler family would own 16% of the remaining stock and continue in even a stronger position as the biggest stockholder.

The latest word is that Tribune may sell about $500 million of its "non-core" assets, which apparently is taken to mean various television stations and other properties but not including the L.A. Times. Two TV stations have already been sold.

However, in its article on Tribune this week, Fortune magazine noted that sale of the Times would bring a very substantial reduction of the Tribune debt. This could ultimately prove enticing to the Chicago businessmen who dominate the Tribune board and who are exceedingly uncomfortable with anything west of the Mississippi.

The Wall Street Journal reports this morning that the Chandler family interests vow to continue their struggle for a change in Tribune policies, and my sense is that FitzSimons has not succeeded in stabilizing the situation. More developments are to be expected.

Meanwhile, the Times editors this morning have moved foreign news from the tail end of Section A to Page 4, in the front of the section, which is a welcome move restoring part of what the foreign bureaus suffered when their position on Page 3 was lost to a second summary page and they were shoved back in the section.

With new intense Iraq war news, and crisis developments in Gaza, Iran, North Korea, and Somalia, it seems clear that foreign news should indeed be given the most prominent location in Section A. In fact, to reiterate a point I've made before, the second summary page ought to be dropped as a waste of space and foreign news restored on Page 3.

It is also reported today that the longtime Times personnel manager under both Otis Chandler and Tom Johnson, Robert L. Flannes, died last Saturday at the age of 85.

Flannes, both pleasant and competent, presided over the very generous personnel policies of the Times which characterized the Norman Chandler, Otis Chandler and Tom Johnson publisherships, including an in house medical staff at three plants, free parking for employees, and an annual wage adjustment which kept employee salaries above national averages in the newspaper business.

Bill Dwyre this morning paid tribute to Flannes as "this kind, wonderful and important man. He was my tennis buddy for years, and my sense was that he was driven by a desire to make sure the employees at the L.A. Times ALWAYS had the best of everything...and for many years they did."

Under the Tribune Company's shortsighted, cost-cutting policies, not to mention Mark Willes, the medical staffing and free parking were dropped, and the wage increases sharply reduced. The Tribune-owned Times no longer keeps up with the standards it once adhered to.

Flannes was present during the halcyon days of the Times, which might return again, if FitzSimons was to admit failure, sell the paper back to local owners and resign.

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