Triangulating on Tribune

Tribune (TRB) shares rose Wednesday as investors reconsidered the prospect that the media giant will be sold.

Tribune said last week it would borrow a bunch of money to buy back a huge chunk of stock. Chairman Dennis FitzSimons called the plan a way to refocus on growth, but investors wondered if management wasn't simply trying to entrench itself against restless shareholders. The Tribune tribulations come in the wake of this spring's forced sale of newspaper rival Knight Ridder (KRI).

Now, with the three Tribune board members from the big-shareholding Chandler family signaling they don't like FitzSimons' $2 billion plan, media investors are wondering if Tribune isn't being pushed onto the auction block -- regardless of what management might like.

"It forces you to wonder why the Chandlers wouldn't go along with the plan," says John Morton, of Morton Research. "Maybe they want to see what kind of offer might come around."

Benchmark's Ed Atorino says the boardroom breakup raises questions for other institutional investors. "It may give pause to groups like the McCormick fund who agreed to sell, but who might rethink their position," says Atorino. Atorino says the Chandler move "does change the dynamics of the process."

Tribune shares were up nearly 2% to over $30.50 midday Wednesday.

Last week Tribune, owner of the Los Angeles Times, Chicago Tribune and 26 TV stations, said it would buy back shares through a Dutch auction self-tender at $28 to $32.50 a share. Tribune also agreed to buy 10 million shares from the McCormick Tribune Foundation, a 13.5% stakeholder, at the tender offer price and 12 million shares in the open market afterwards. The repurchase is expected to amount to 25% of its common stock and to be paid for with bank debt and bonds.

At the same time Tribune committed to the sale of $500 million in noncore asset sales and $200 million in cost cutting over the next two years.