2ND UPDATE: Tribune To Buy Back Shares, Pursue Asset Sales

05-30-06 06:38 PM EST

CHICAGO (Dow Jones) -- Tribune Co. shares rose more than 7% Tuesday after the company said that it would buy back up to 75 million shares of its common stock, and announced that it expects to sell at least $500 million in certain noncore broadcasting and publishing assets outside of its top three markets.

Separately, the company said that the Securities and Exchange Commission has closed its two-year inquiry into circulation overstatements at Newsday and Hoy newspapers, and that Tribune will not have to pay any fines or face any sanctions as a result of the investigation.

Shares of Chicago-based Tribune (TRB) -- publisher of the Chicago Tribune and the Los Angeles Times, and owner of Superstation WGN - rose $2.01 to close at $ 29.90 on heavy volume of 9.7 million shares.

Tribune said that up to 53 million shares could be repurchased on a Dutch- auction tender offer, under which shareholders can tender some or all of their shares at a price in the range of $28 and $32.50 each. The tender begins Tuesday and is expected to expire June 26.

After the offer is completed, the company's principal shareholders, McCormick Tribune Foundation and Cantigny Foundation, have agreed to sell 10 million shares to Tribune. That sale is subject to adjustment depending on how many shares are tendered, and is contingent on Tribune buying back at least 30 million shares in the tender.

McCormick Tribune and Cantigny, nonprofit charitable organizations, own a combined 13.6% of Tribune's outstanding shares.

In an order filed Tuesday, the SEC said that from January 2002 to March 2004, regulators said Tribune submitted inflated circulation figures at New York-based Newsday and Hoy in documents filed with the commission and in other places.

Tribune did this, according to the SEC, "because it did not have sufficient internal controls to detect the schemes used by the circulation personnel."

The SEC also said that it accepted Tribune's offer to settle the case after it considered "remedial acts promptly undertaken by Tribune and the cooperation that Tribune afforded the commission's staff."

The company admitted to no wrongdoing as part of the settlement.

In 2004, Tribune recognized $90 million in pretax charges to settle advertisers' anticipated claims related to the inflated figures. Ad rates are set by circulation numbers, so when circulation figures are inflated, advertisers pay more for ads than they otherwise would.

On Tuesday, nine former employees and contractors of Newsday and Hoy pleaded guilty in federal court to participating in the circulation fraud at the newspapers. Among those executives were Louis Sito, former publisher of Hoy and vice president of Newsday; Robert Brennan, former circulation director at Newsday; and Ed Smith, who formerly served as liaison to the Audit Bureau of Circulations for both papers.

Tribune Chief Executive Dennis FitzSimons told analysts during a conference call Tuesday that they should not read anything into McCormick Tribune's decision to sell some shares at a time when the stock is near its lowest levels this decade.

McCormick Tribune has grants that have to be paid annually, among other expenses, and needs to maintain "a certain amount of liquidity," FitzSimons said.

Tribune Co. also announced plans to pursue the divestment of $500 million in noncore broadcasting and publishing assets, as well as real estate and securities held for investment.
Don Grenesko, Tribune's senior vice president of finance and administration, said on the call that investors should expect the asset sales to be done within six to 12 months.

FitzSimons said that the Chicago Cubs baseball team is not for sale, and that the company is not considering the divestiture of any assets in its top three markets -- Chicago, Los Angeles and New York, where it publishes Newsday and owns television station WPIX.

Dow Jones Newswires