Tribune Gets Attention of Corporate Raider

Nelson Peltz, Cost-Cutting Advocate, Buys Up Shares

By Published on .

Most Popular
CHICAGO (AdAge.com) -- Shares of Tribune Co. soared more than 4% this morning on news that corporate raider Nelson Peltz has taken a small stake in the Chicago-based media conglomerate.
Nelson Peltz
Nelson Peltz Credit: AP

Mr. Peltz, who has been a high-profile thorn in the sides of top executives at Wendy's and Heinz of late, said in a filing with the U.S. Securities & Exchange Commission that he bought 2.825 million Tribune shares -- about 1% of the total outstanding -- during the quarter ended June 30.

Not a passive investor
"He's surely not known as a passive investor," said John Miller, a VP at Ariel Capital Management, a Chicago firm that is among Tribune's largest shareholders. "If he continues to build his stake, I'm sure we'll see some news from him."

News of Mr. Peltz's purchase comes as the Tribune's top executives are warring with their largest outside shareholders, the Chandler family, over the company's future. The Chandlers, who sold their Times Mirror Co. to Tribune in an ill-fated 2000 merger, in June called for a breakup of the company.

Tribune's board instead opted for a $2 billion share buyback, a decision the Chandlers called "hasty and ill-informed" in a public letter to the board. The board quickly fired back, saying the Chandlers were placing their own interests above those of other shareholders.

While the public hostilities have since ceased, the detente could be brief if the swashbuckling Mr. Peltz sticks to his usual tactics. He recently forced Wendy's to spin off some assets, and he's engaged in a nasty proxy fight at Heinz.

Bad news for dailies?
He also tends to push forcefully for aggressive cost cuts at the companies he acquires, a prospect that could make staffers at Tribune publications such as the Los Angeles Times, Chicago Tribune and the Baltimore Sun grimace. All of those publications have seen sharp cost cuts and layoffs in recent years.

But investors, who've seen Tribune's shares plummet from the low $50s in early 2004 into the high $20s this year, are apparently more encouraged, bidding up Tribune's shares by about 4%, to $30.95, in heavy morning trading.

"Given Peltz's background and the previous call for action by the Chandler family (15% owners), TRB shares are likely to react somewhat positively as speculation will again surface on ways to unlock value," wrote Merrill Lynch media analyst Lauren Rich Fine. "While acknowledging the stock could get a boost, we are hesitant to pursue the stock given our limited sense of upside and belief that the timing is bad as it relates to extracting value from newspapers and TV stations."

Underscoring that point: Tribune today announced July 2006 results that saw its total revenue drop 1.4%, to $503 million. Publishing revenue dropped 1.9%, to $353 million, while the broadcasting and entertainment division's revenue fell 0.3%, to $150 million.
In this article: