Tribune Deal Faltering

Last Tuesday the marriage of Sam Zell and the Tribune Company was pegged at fifty-fifty, at best, of being consummated to completion. With the cash flow decline, announced last Friday, the odds have changed to the negative even further.

The FCC uncertainty on granting waivers to the Tribune on cross ownership of television, radio, and newspapers in the same market, could cause this transaction to fizzled as well. The Tribune creditors are now asking to be repaid in eighteen months instead of the seven years as in the original agreement, making the cash flow decline much more severe to this deal.

Today Jim Cramer dropped a bombshell on Tribune Employees, and I really dislike reading Jim Cramer’s articles, because he speaks the truth. In this case, the truth hurts very deeply.

Here are a few of the lines from Jim Cramer story on The Street

“You have to feel terrible about what's about to happen to the Tribune employees. I think they're about to lose everything. This whole $34 bid to take the company private depends on them, in their Aug. 21 vote. Sam Zell has very little skin in the game, given his war chest, and these employees have everything in the game.

The hysterical thing about this particular employee stock ownership plan is that 25 years ago at Harvard Law School we studied the disgrace of the Carter Hawley Hale deal. That was another ESOP takeover, this time with a retailer, done as a defense to takeover -- and everybody got wiped out. The winner was Sam Zell, who bought the retailer's property after the wipeout”.

[snip]

“The astonishing decline in cash flow -- 27% down -- at the Los Angeles Times just tells you this deal will be a huge catastrophe for a lot of people who can't afford it. This Tribune deal is like a slow-motion train wreck that can't be avoided. When the deal was being done the numbers were bad, but not this bad. They are getting worse by the day. The notion that a front-page ad will make a difference is an affront to common sense.

Why doesn't anyone care about this? Why are we letting these employees put their eggs in one basket? Why are we setting them up as people who will no doubt lose everything? Why isn't someone stopping this ludicrous deal?”

Not all Tribune Employees will be losers, a select few sitting in Tribune Towers, will be set for life.

A co-worker put this Tribune mess in perspective, so a simple person like myself could understand, he said “This is a great big shit sandwich, and all Tribune Employees will have to take a bite”.