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Tribune to Go Private for $34 Per Share
Employee Stock
Ownership Plan (ESOP) Created
Sam Zell to Invest,
Join Board
Chicago
Cubs and Comcast SportsNet Interest to be Sold
CHICAGO,
April 2, 2007 -- With the completion
of its strategic review process, Tribune Company (NYSE:TRB)
today announced a transaction which will result in the company
going private and Tribune shareholders receiving $34 per
share. Sam Zell is supporting the transaction with a $315
million investment. Shareholders will receive their consideration
in a two-stage transaction.
Upon completion of the
transaction, the company will be privately held, with an
Employee Stock Ownership Plan (ESOP) holding all of Tribune’s then-outstanding common stock
and Zell holding a subordinated note and a warrant entitling
him to acquire 40 percent of Tribune’s common stock.
Zell will join the Tribune board upon completion of his initial
investment and will become chairman when the merger closes.
The first stage of the transaction is a cash tender offer
for approximately 126 million shares at $34 per share. The
tender offer will be funded by incremental borrowings and
a $250 million investment from Sam Zell. It is anticipated
to be completed in the second quarter of 2007. The second
stage is a merger expected to close in the fourth quarter
of 2007 in which the remaining publicly-held shares will
receive $34 per share. Zell will make an additional investment
of $65 million in connection with the merger, bringing his
investment in Tribune to $315 million.
The board of directors of Tribune, on the recommendation
of a special committee comprised entirely of independent
directors, has approved the agreements and will recommend
Tribune shareholder approval. Representatives of the Chandler
Trusts on the board abstained from voting as directors. However,
the Chandler Trusts have agreed to vote in favor of the transaction.
The agreements reached between Tribune, the ESOP and Zell
and announced today include the following transactions:
- The ESOP will immediately purchase
$250 million of newly issued Tribune common stock for $28
per share.
- Zell will invest $250 million
in Tribune and join its board of directors. Of this initial
investment, $50 million will purchase approximately 1.5
million newly-issued shares of Tribune common stock for
$34 per share and $200 million will purchase a note exchangeable
for common stock at a $34 per share exchange price. The
Zell investment will be completed upon expiration or early
termination of the Hart-Scott-Rodino waiting period, subject
to other customary conditions.
- Tribune will launch a tender
offer to repurchase approximately 126 million shares of
its common stock for $34 per share, returning approximately
$4.3 billion of capital to shareholders. The tender offer
will be subject to the completion of financing arrangements,
receipt of a solvency opinion and other customary conditions;
it is expected to be completed in the second quarter of
2007.
- Following the tender offer, Tribune
and the ESOP will merge and all remaining Tribune stock
will be converted to cash at $34 per share. The merger
will be subject to Tribune shareholder approval, FCC
and other regulatory approvals, receipt of financing
and a solvency opinion, and other conditions reflected
in the definitive agreements that will be filed later
this week with the SEC. If the merger has not closed
by Jan. 1, 2008, shareholders will receive an additional
amount of cash based upon an 8 percent annualized "ticking
fee" that will accrue from
Jan. 1, 2008, until the closing.
- Up to the time of shareholder approval,
Tribune’s
board of directors will be entitled, subject to specified
conditions, to consider unsolicited alternative proposals
that may lead to a superior proposal. In the event such
a superior proposal is selected, the break-up fee to Zell
would be $25 million.
- In conjunction with the execution
of these agreements, Tribune will suspend its regular quarterly
dividend.
- Upon completion of the merger, Zell’s
initial $250 million investment will be redeemed and Zell
will make a new investment through the purchase of a subordinated
note for $225 million with an 11-year maturity and a warrant
for $90 million with a 15-year maturity. The warrant can
be exercised by Zell at any time to acquire 40 percent
of Tribune’s
common stock for an aggregate exercise price initially
of $500 million.
- The company will be led by a
board of directors with an independent majority. Dennis
FitzSimons, as Tribune president and chief executive officer,
will remain a member of the board, along with at least
five independent directors and an additional director affiliated
with Zell.
"The strategic review process was rigorous
and thorough," said
William A. Osborn, Tribune’s lead director and
chairman of the special committee that was charged
with overseeing the company’s evaluation of strategic
alternatives. "The
committee reviewed a variety of third-party proposals
and alternatives for restructuring the company. We
determined that this course of action provides the
greatest certainty for achieving the highest value
for all shareholders and is in the best interest of
investors and employees."
Osborn added, "In particular, we took into
account a letter received from Messrs. Broad and Burkle,
dated March 29, 2007, expressing their willingness to enter
into a definitive contract offering shareholders $34 per
share -- that
is, the same price as the ESOP/Zell plan. We considered
this letter in the light of prior discussions with Messrs.
Broad and Burkle and the completed negotiations of definitive
agreements with Zell and the ESOP trustee."
Sam Zell said, "I
am delighted to be associated with Tribune Company, which
I believe is a world-class publishing and broadcasting
enterprise. As a long-term investor, I look forward to
partnering with the management and employees as we build
on the great heritage of Tribune Company."
"The steps announced today will deliver
a positive outcome for all Tribune shareholders, including
our employees," said
Dennis FitzSimons, Tribune chairman, president and chief
executive officer. "We welcome Sam Zell to the Tribune
board and know that he will bring valuable insights from
his successful career."
FitzSimons added, "As a private company, Tribune
will have greater flexibility to transform our publishing/interactive
and broadcasting businesses with an eye toward long-term
growth. Importantly, our employees will have a significant
stake in the company’s future. Tribune’s local
media businesses have succeeded through the years by serving
their communities well, by providing great journalism and
programming to readers, viewers and listeners and by creating
value for advertisers who need to reach them. That will not
change."
Tribune Employee Retirement Plans
Beginning Jan. 1, 2008, eligible Tribune employees will
participate in three retirement plans:
- ESOP: The newly-created ESOP will be
funded solely through company contributions. Those contributions
will be invested in shares of Tribune stock (the private
company), which will be allocated each year among eligible
employees’ accounts
in the ESOP trust. The first allocation, for the year 2008,
will be made in early 2009. The company initially anticipates
an annual allocation of approximately 5 percent, based
on employees’ eligible compensation. GreatBanc Trust
Company will serve as the ESOP trustee, and the ESOP will
be administered by a board-appointed employee benefits
committee.
- Cash Balance Plan: A cash balance
plan will be funded entirely by the company and provide
a 3 percent annual allocation to each eligible employee’s
cash balance plan account.
- Existing 401(k)
Plans: Eligible employees will continue having the opportunity
to contribute a portion of their pre-tax earnings to 401(k)
accounts.
There will be no change to pension benefits previously
earned by employees and retirees. Tribune sponsors defined-benefit
pension plans for approximately 37,000 participants. As
of year-end 2006, the pension plans had assets of over
$1.7 billion and were overfunded by more than $200 million.
"Going forward, employees participating
in the ESOP will be invested alongside Sam Zell, one of
today’s
most successful investors. With the additional plans, Tribune
employees will have a well-rounded package of retirement
benefits," said FitzSimons.
Financing Commitments
Tribune has financing
commitments from Citigroup, Merrill Lynch and JPMorgan
Chase to fund the transactions. In the first stage, Tribune
will raise $7.0 billion of new debt of which $4.2 billion
will be used to complete the tender offer and the remaining
$2.8 billion will be used to refinance existing bank credit
facilities. In the second stage, Tribune will raise an
additional $4.2 billion of debt which will be used to buy
all the remaining outstanding shares of the company. Tribune’s
existing publicly-traded bonds are expected to remain outstanding.
Sale of the Chicago Cubs
Separately, Tribune announced
that following the 2007 baseball season, it will sell the
Chicago Cubs and the company’s
25 percent interest in Comcast SportsNet Chicago. The sale
of the Cubs is subject to the approval of Major League Baseball,
and is expected to be completed in the fourth quarter of
2007. Proceeds will be used to pay down debt.
Advisors
The financial advisors to the company
and its board of directors were Merrill Lynch and Citigroup.
The financial advisor to the special committee was Morgan
Stanley. Legal counsel to the company and its board of
directors were Wachtell Lipton Rosen & Katz, Sidley Austin LLP and, for ESOP matters,
McDermott Will & Emery. Legal counsel to the special
committee was Skadden Arps. Duff & Phelps served as financial
advisor to the ESOP trustee and its legal counsel was K & L
Gates. The financial advisor to Zell was JPMorgan Chase ,
and legal counsel to Zell were Jenner & Block, Arnold & Porter,
Morgan Lewis, and Dow Lohnes.
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Important Additional Information Regarding the Merger and
the Tender Offer will be filed with the SEC:
In connection with the proposed merger transaction, Tribune
Company will file a proxy statement and other documents with
the Securities and Exchange Commission (the “SEC”).
BEFORE MAKING ANY VOTING DECISION WITH RESPECT TO THE PROPOSED
MERGER TRANSACTION, INVESTORS AND SECURITY HOLDERS ARE URGED
TO READ THE PROXY STATEMENT AND OTHER RELEVANT MATERIALS
WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. Investors and security holders may obtain a
free copy of the proxy statement (when available) and other
documents filed by Tribune with the SEC at the SEC’s
website at http://www.sec.gov. The definitive proxy statement
and other relevant documents may also be obtained free of
charge on Tribune’s website at www.tribune.com or by
directing a request to Tribune Company, 435 North Michigan
Avenue, Chicago, IL 60611, Attention: Investor Relations.
You may also read and copy any reports, statements and other
information filed by Tribune with the SEC at the SEC public
reference room at 450 Fifth Street, N.W. Room 1200, Washington,
D.C. 20549. Please call the SEC at 1-800-SEC-0330 or visit
the SEC’s website for further information on its public
reference room.
Tribune Company and its directors
and executive officers may be deemed to be “participants” in the solicitation
of proxies from the shareholders of Tribune in connection
with the proposed merger transaction. Information about Tribune
and its directors and executive officers and their ownership
of Tribune common stock is set forth in the proxy statement
for Tribune’s Annual Meeting of Shareholders, which
Tribune is required to file with the SEC. Shareholders and
investors may obtain additional information regarding the
interests of Tribune Company and its directors and executive
officers in the merger transaction, which may be different
than those of Tribune’s shareholders generally, by
reading the proxy statement and other relevant documents
regarding the merger transaction, which will be filed with
the SEC.
This press release is for informational purposes only and
is not an offer to buy or the solicitation of an offer to
sell any shares of Tribune's common stock. The solicitation
of offers to buy Tribune's common stock will only be made
pursuant to the offer to purchase and related materials that
the company will be sending to its shareholders (when available).
Shareholders should read those materials carefully (when
available) because they will contain important information,
including the various terms and conditions of the offer.
Shareholders will be able to obtain copies of the offer to
purchase, related materials filed by the company as part
of the statement on Schedule TO and other documents when
filed with the SEC through the SEC's internet address at
http://www.sec.gov without charge. Shareholders will also
be able to obtain copies of the offer to purchase and related
materials, when and as filed with the SEC (excluding exhibits),
without charge from the company or by written or oral request
directed to the information agent identified in the offer
to purchase.
Forward-Looking Statements
This press release contains certain
comments or forward-looking statements that are based largely
on the Company's current expectations and are subject to
certain risks, trends and uncertainties. You can identify
these and other forward looking statements by the use of
such words as "will," "expect," "plans," "believes," "estimates," "intend," "continue," or
the negative of such terms, or other comparable terminology.
Forward-looking statements also include the assumptions underlying
or relating to any of the foregoing statements. Actual results
could differ materially from the expectations expressed in
these statements. Factors that could cause actual results
to differ include risks related to the transactions being
consummated; the risk that required regulatory approvals
or financing might not be obtained in a timely manner, without
conditions, or at all; the impact of the substantial indebtedness
incurred to finance the consummation of the tender offer
and the merger; the ability to satisfy all closing conditions
in the definitive agreements; difficulties in retaining employees
as a result of the merger agreement; risks of unforeseen
material adverse changes to our business or operations; risks
that the proposed transaction disrupts current plans, operations,
and business growth initiatives; the risk associated with
the outcome of any legal proceedings that may be instituted
against Tribune and others following announcement of the
merger agreement; and other factors described in Tribune’s
publicly available reports filed with the SEC, including
the most current annual 10-K report, which contain a discussion
of various factors that may affect Tribune's business or
financial results. These factors, including also the ability
to complete the tender offer or the merger, could cause actual
future performance to differ materially from current expectations.
Tribune is not responsible for updating the information contained
in this press release beyond the published date, or for changes
made to this document by wire services or Internet service
providers. Tribune's next quarterly 10-Q report to be filed
with the SEC may contain updates to the information included
in this release.
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TRIBUNE (NYSE:TRB) is one of the country’s
top media companies, operating businesses in publishing,
interactive and broadcasting. It reaches more than 80 percent
of U.S. households and is the only media organization with
newspapers, television stations and websites in the nation’s
top three markets. In publishing, Tribune’s leading
daily newspapers include the Los Angeles Times, Chicago Tribune,
Newsday (Long Island, N.Y.), The Sun (Baltimore), South Florida
Sun-Sentinel, Orlando Sentinel and Hartford Courant. The
company’s broadcasting group operates 23 television
stations, Superstation WGN on national cable, Chicago’s
WGN-AM and the Chicago Cubs baseball team. Popular news and
information websites complement Tribune’s print and
broadcast properties and extend the company’s nationwide
audience. |
