Posted on 06/14/2006 4:15:02 PM PDT by fight_truth_decay
Chandler family may actively pursue change in management
(Crain’s) — Chandler Trusts, the second-largest holder of Tribune Co. stock, is calling for an independent management review after questioning the leadership abilities of the media conglomerate’s executive team.
In a letter filed Wednesday with the Securities and Exchange Commission, the Chandler family strongly recommended that the Tribune’s board of directors appoint an independent committee to evaluate management and to “promptly execute alternatives to restore and enhance stockholder value.” The Chandler family is also calling for the media company to spinoff its broadcasting properties, among other actions.
Related story: Chandler family calls for breakup of Tribune
Failure to do so would force members of the Chandler family to take stronger measures, ones reminiscent of the recent battle that Knight-Ridder Inc. fought against its largest shareholders who succeeded in putting the newspaper chain up for sale.
“If timely action is not taken, however, we intend to begin actively pursuing possible changes in Tribune’s management and other transactions to enhance the value realized by all Tribune stockholders by engaging with other stockholders and other parties,” members of the Chandler trusts wrote in a letter dated Tuesday.
Representatives from the Chandler family and the Tribune Co. were unavailable to comment and attempts to reach several board members were unsuccessful.
Charles Bobrinskoy, vice chairman of Ariel Capital Management, one of Tribune’s largest institutional shareholders, said he has faith in the current management and its business plan.
“We continue to have confidence in Dennis FitzSimons and his management team,” Mr. Bobrinskoy said. “We believe Tribune has a very strong board of directors and we are confident they will do what is necessary to maximize shareholder value.”
The Chandler letter is the latest volley in a battle between the heirs of the Tribune-owned Los Angles Times and Tribune’s executive team. Tension began to boil after Dennis FitzSimons, Tribune’s chief executive officer, announced a $2 billion share buyback offer on May 30. Chandler family trusts, which include three members of Tribune’s board of directors, called that strategy “hasty,” “fundamentally flawed” and “ill-informed” and they have said they will not participate in the program.
The letter also suggests splitting Tribune’s print and broadcast business and exploring the sale of the company’s 11 daily newspapers, including the Chicago Tribune individually or as a group.
Chandler family members criticize Mr. FitzSimons and his team for executing businesses strategies the trust views as “once again acquiescing to sub-par growth in return for short-term cash flow.”
Wall Street analysts, investors and Tribune employees have watched the company’s stock price steadily sink in the past two years as the media industry battles declining readership, viewership and advertising revenue. Tribune stock has fallen more than 38% since the start of 2004.
“The gravity of management’s failure to address fundamental strategic issues is apparently from the precipitous decline in stock value over the past three and a half years,” the letter stated. “Clearly, it is time for prompt, comprehensive action.”
Tribune stock closed up 89 cents, or 2.9%, at $31.94. The stock is up about 15% since the end of May.
Note: AP Business Writer reported that the company stock rose after The Wall Street Journal reported the company has been seriously considering a major overhaul that could include spinning off its broadcast division and eventually selling the rest of the company. But, who will stay and who will go?
In addition to the LA Times, Tribune owns 26 television stations from New Orleans to Albany, N.Y., Atlanta to Seattle, New York to Los Angeles. Its publications include 11 English-language daily newspapers. There are a few cable concerns, assorted Web sites, a television programming outfit (holding include 31 percent stake in cable's Food Network)and the Chicago National League Ball Club. The Cubs would not seem to be a core asset. They're a baseball team. FitzSimons told analysts in a conference call, "Cubs baseball is vital programming for Tribune-owned WGN-AM 720, WGN-Ch. 9 and WGN's superstation operation. So the team's not for sale as part of this transaction."
The Chandler family formerly ran the LA Times and became significant Tribune shareholders following the sale of Times Mirror Co. to Tribune in 2000.
Restructuring programs were announced back in 2001. "We have been presented with very significant external challenges," said John W. Madigan, Tribune's chairman and chief executive officer. "Our first priority since the attacks of September 11, has been to keep our readers, viewers and listeners informed with comprehensive news coverage of America's war on terrorism."
"The financial impact of this commitment to serving the public is significant-our newspapers published extra editions, our television and radio stations aired extended news coverage, and our web sites increased capacity," continued Madigan. "And, at the same time, advertisers began rethinking their buying strategies."
"But we continue to achieve significant cost savings by holding down expenses, reducing staff and positioning the company for long-term success when the economy recovers."
Ownership stakes in the WB Network, the Food Network and the CareerBuilder.com Web site also could be sold for cash to pay down debt, buy back shares or make acquisitions. In all, Tribune has a portfolio of ancillary assets worth as much as $2 billion, analysts say.
The company has been struggling with dwindling audiences and lagging advertising. Tribune shares plunged almost 27% in 2005.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.