Wednesday, April 15, 2009

Zell Admits ‘Mistake’ in Tribune Co. Purchase

The company is looking at all its options

From Crain's

Sam Zell admits that taking over Tribune Co. hasn’t gone according to plan and was a “mistake.”

“The definition if you bought something and it’s now worth a great deal less, you made a mistake,” he told Bloomberg Television [VIDEO at 10:11 and 14:30] on Wednesday. “And I’m more than willing to say I made a mistake. I was too optimistic in terms of the newspaper’s ability to preserve its position.”

The Chicago billionaire, who made his fortune from commercial real estate, was instrumental in taking the parent of the Chicago Tribune and Los Angeles Times private through a complex deal that saddled it with $13 billion in debt. Tribune Co. filed for Chapter 11 bankruptcy protection in December, a move Mr. Zell said in Wednesday’s interview was necessary to “stop the bleeding and preserve a great company.”

The process that Mr. Zell used to take Tribune private caught the attention recently of the U.S. Department of Labor, which last month subpoenaed the company for documents related to its Employees Stock Ownership Plan, now the sole owner of Tribune Co.

Mr. Zell said he was unprepared for how quickly and steeply the newspaper industry has deteriorated.

“We underwrote the Tribune (deal) based on the fact that over the previous five years, we had seen an erosion of about 3%,” he told Bloomberg; he didn’t specify the losses to which he was referring. But in the months before filing for bankruptcy protection, the company saw a 25% decline, losses that “in a leverage business are just insurmountable.” He called the figure “significantly larger” than expected.

He said the company is looking at all its options, but he ruled out the possibility of a merger.

“That’s like asking someone in another business if they want to get vaccinated with a live virus,” he said. “I don’t think there’s a long list of people who want to buy a newspaper company today.”

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