Only time will tell, of course, but can we get a clue from the mouth of Sam Zell, the new out-of-town owner? He gave a talk yesterday called ” ‘Make Me An Offer’: Sam Zell and the $39-Billion Buyout of Equity Office Properties” to a class of Stanford University law students.
He made a fortune worth an estimated $4 1/2 billion by turning around distressed assets. It’s a well-known fact that in February Zell sold the real estate firm he built into the nation’s largest collection of office buildings.
Told that many people didn’t think newspapers were a good business because of declining circulation and falling ad revenues, he said:
“A lot of people didn’t think the railcar business was a good investment. I made a quarter-billion dollars. A lot of people didn’t think container leasing was a good investment. I made a half-billion. Should I go on?”
I think not, we get the point. The Chicago company’s holdings include the Los Angeles Times, KTLA-TV Channel 5 and the Chicago Cubs baseball team.
His privatization plan, about to be concluded, put him in the driver’s seat for a mere $315 million of financing making him chairman, with the right to buy up to 40% of the company later if he so wishes.
Meanwhile, he will be taking care of 38 top executives from a cash bonus pool of $6 1/2 million. Apart from the Chief Executive, who chose not to participate, one notes that the company’s current finance chief would receive $600,000, the head of the newspaper division $400,000, and the head of the broadcasting division $350,000.
read SEC Form 8-K for TRIBUNE CO filed April 5, 2007
The Chandler family, the largest shareholder, would depart the board, where 3 members have been sitting since they sold out to the Chicago Tribune in year 2000 for around 8 billion dollars.
What about the employees, the reporters and columnists and editors (and one presumes the printers and truck drivers and other support personnel), will they be happy?
Consider, for this is how it works for failing companies whose profits are declining, like Delta Airlines, emerging from bankruptcy (see below).
The new private company will be partly employee-owned, functioning in a profit-sharing plan. Note the word “profit”. If there aren’t any, tough. They’ll have to take salary cuts to avoid going out of business.
Is this Capitalism’s answer to Socialism? Employee part ownership? Can one look for equality with other owners, seats on the board, no strings attached? Don’t ask.
Well, perhaps we should give Sam Zell a break. We admit that based on the available evidence he is a brilliant negotiator. And he admitted that because he had been in the news business for less than a week, he wasn’t a genius at that. Yet.