"Importantly, our employees will have a significant stake in the company’s future." - Dennis FitzSimons, former Tribune chairman, president and chief executive officer, speaking on 2007 "privatization".
Joe's quick version: Real estate mogul Sam Zell "privatizes" Tribune Co., using every means other than his own money including the employee's pension plan, finds ways to skirt paying taxes by having them invest directly into the company and then runs the 147 year old company into the ground, screwing with the lives of over 20,000 workers.
More in depth version: by Robert at Broadcast Union News,
Sam Zell Gambles With His Employees Future... And Loses Big Time
Tribune was a public company with eight newspapers, 23 TV stations, the cable super station WGN, Wrigley Field, the Chicago Cubs, and a 31% share of the Food Network. Each newspaper, TV station, WGN, the baseball team, and the Food Network were individually profitable on their own and together created a successful corperation with a good return for the stockholders.
Along comes Sam Zell, who buys the company for $8.2 billion dollars. He puts up $315 million of his own money in return for the right to purchase a 40% ownership stake for an additional $500 million over 15 years. In other words he eventually gets 40% of the $8.2 billion dollar company for $815 million dollars or just under 20 cents on the dollar. Not a bad deal for Sam.
He borrows the rest of the $13 billion dollars needed to buy out the stockholders from banks and using the employee's pension plan as well as having the employees own the stock of the now private company in an ESOP (Employee Stock Ownership Plan) to save himself millions in taxes.
This deal requires Tribune to pay out $211 million dollars per quarter to service this debt.
$211 million dollars per quarter before paying one employee, buying one piece of newsprint, paying for a single baseball, or airing one second of programing.
As an analyst at CreditSights explained at the time: "If there is a problem with the company, most of the risk is on the employees, as Zell will not own Tribune shares." He continued: "The cash will come from the sweat equity of the employees of Tribune."
It was Tribune's board that sold the company to Mr. Zell — and allowed him to use the employee's pension plan to do so. Despite early resistance, Dennis J. FitzSimons, then the company's chief executive, backed the plan. He was paid about $17.7 million in severance and other payments. The sale also bought all the shares he owned — $23.8 million worth. The day he left, he said in a note to employees that "completing this 'going private' transaction is a great outcome for our shareholders, employees and customers."
Well, at least for some of them.
At $34 a share, Tribune shareholders did well. Tribune's current bonds traded between 3 and 6 cents on the dollar on Monday.
Dan Neil, a Pulitzer Prize-winning columnist for The Los Angeles Times, led a lawsuit with other Tribune employees against Mr. Zell and Tribune this fall. The suit contended "through both the structure of his takeover and his subsequent conduct, Zell and his accessories have diminished the value of the employee-owned company to benefit himself and his fellow board members."
Joe's Note: Dec. 8th, 2008: Tribune Co. Files For Bankruptcy
If the employees win, they will become Tribune creditors — and stand in line with all other creditors in bankruptcy court.
Tribune has 19,000 employees, 70% of whom are union members represented by AFTRA, CWA-NABET, DGA, IATSE, IBEW, Newspaper Guild, and others.
Their jobs are all at risk.
1,300 people have already lost their jobs at various Tribune newspapers and TV stations.
Joe's Note's: Some of Tribunes most notable holdings include, The Baltimore Sun, The Chicago Tribune, NY Newsday, The LA Times, the Spanish newspaper Hoy, WGN-TV, WPIX TV in NY, The Chicago Cubs, etc.
A full list can be found at their website's timeline
I also wrote up about Tribune was a frontier in the extinction of critical journalism way back in Feburary 2007 in the article entitled "As Seen On TV with HBO's The Wire, Tribune Co. drops 120 staff members from NY Newsday."
You can keep up with all media news at Broadcast Union News, a huge thanks to Robert for explaining this to those of us not in the media field.