June 14, 2006

Chandlers Call for Tribune Breakup

A boardroom feud at the Tribune Company escalated today as the Chandler family — the billionaire former owners of The Los Angeles Times and now major Tribune investors — called for a breakup of the company.

In a letter sent to the Tribune Company's board, trustees representing the Chandler family accused Tribune's management, led by its chairman and chief executive, Dennis J. FitzSimons, of implementing a failed strategy for melding local television stations and newspapers, and failing to keep pace with industry rivals in everything from revenue growth to Internet strategy.

The Chandler trusts, which own a 12.2 percent voting interest in Tribune, called for the appointment of a special committee of independent Tribune directors to study spinning off the company's 26 television stations, and, possibly, its 11 newspapers, which include The Los Angeles Times, The Chicago Tribune and Newsday.

If the board failed to do as the trusts asked, the Chandlers warned, they would "begin actively pursuing possible changes in Tribune's management and other transactions" that could involve rallying other shareholders and private equity firms to their cause.

The Tribune Company did not issue an immediate response, but has previously said it was sticking to a plan to borrow money and buy back up to 25 percent of its shares at a cost of about $2 billion, and sell some assets, after examining a range of strategic alternatives. The Chandlers today called that plan "hasty and ill-informed."

Tribune's shares rose 89 cents, or 2.9 percent, to close at $31.94 on the New York Stock Exchange today on news of the Chandlers' letter. The company's stock has risen 14.5 percent since the Tribune Company announced the stock buyback on May 30.

In sending the 11-page document, the Chandlers also said formally that they would not tender their shares into the stock buyback plan, which the family's three directors on the 11-member Tribune board already opposed.

While the letter sets the stage for a boardroom battle that could lead to Tribune being broken up and sold piecemeal, it comes in the midst of a separate dispute between the Chandlers and Tribune over the value of two complex partnerships. These partnerships were set up before Tribune bought the Times Mirror Company, which was controlled by the Chandlers and included The Los Angeles Times, in 2000.

If the rupture on the Tribune board does lead to the sale of some or all of the company's biggest assets, it would continue a major redrawing of the map for the newspaper industry this year. After unhappy shareholders forced the sale of Knight Ridder Inc., the nation's second-largest newspaper owner, to the McClatchy Corporation in March, McClatchy in turn sold several papers to other buyers.