The increasingly ugly boardroom brawl -- which escalated yesterday with the Chandler family's charge that management created a "false sense of urgency" to get the board to hastily approve a recent plan to buy back 25% of the company's shares -- grew even more personal with the Tribune board's latest salvo.
"We completely reject your assertion that ... authorizing the tender offer was 'hasty and ill-informed,'" read a letter authored by the seven Tribune directors without direct ties to management or the Chandler Trusts. "Your proposed restructuring ... primarily benefited the Chandler Trusts at the expense of other shareholders."
The board's allegation concerns a tax-advantaged $3.5 billion partnership the Chandlers formed with the Times Mirror Co., which was inherited by Tribune after it acquired Times Mirror in an ill-fated $8 billion merger in 2000. The now-expiring partnerships contain real estate, Tribune stock and other holdings, and how their demise is handled will have a significant impact on both the company's and the family's bottom lines, which analysts said could explain the quick escalation in harsh rhetoric.
"It's gotten very personal, and it is out of character for both sides," said James Goss, an analyst at Barrington Research Associates in Chicago who covers Tribune and, in the past, covered Times Mirror. "The [partnerships] may be part of this, but I think the Chandlers are saying something reasonably true about [the buyback] adding all this leverage and risk."
Earlier today, echoing the same leverage concerns, Moody's Investor Service downgraded Tribune's once A-rated credit to junk status.
Looking to revive stock price
The Chandlers -- who control 12.2% of Tribune's shares and have three of the company's 11 board seats -- raised concerns about the buyback plan in a June 14 letter that argued for the company to either separate its TV business from its newspaper business, or to sell itself outright. The goal is to revive a stock price that's fallen from $53 in early 2004 into the $20s before speculation over the outcome of the recent boardroom dispute drove the stock up to today's closing price of $32.51.
While most newspaper stocks have struggled during that period, Wall Street has been particularly unkind to Tribune, in part because of specific issues it inherited from Times Mirror, such as a circulation-fraud scandal at Long Island-based Newsday and a $1 billion negative tax judgment stemming from a pre-merger Times Mirror transaction. Increasingly, however, operating trends at Tribune properties have been lagging peers as well.
"I'm not sure the notion of unlocking value for shareholders requires the board to blow the company up as its first course of action," said Barrington's Mr. Goss. "But that's what the Chandlers are suggesting."
A phone call to Chandler Trust attorney and Tribune board member William Stinehart Jr. wasn't immediately returned.