Report: Tomorrow’s Tribune Deal on Shaky Footing

Tomorrow shareholders in the Tribune Company meet to approve an $8.2 billion deal to sell the company–publishers of The Los Angeles Times, Newsday and The Chicago Tribune–to billionaire real-estate developer Sam Zell.

Or do they? The New York Times this morning examines whether the precipitous slump in the newspaper industry (even since the Zell deal was announced in April) might be enough to kill the deal.

The deal promised $34 a share for a stock that had been selling around $30. In May, Tribune bought back half its outstanding shares, with plans to buy the other half in the fourth quarter.

But since then, the trading price has sunk, at one point last Tuesday dipping below $25 — the lowest, adjusted for splits, in nine years. In deal-making circles, a small discount for uncertainty until a transaction closes is standard. But in this kind of situation, with Friday’s closing share price of $25.67, it’s another matter, a discount of nearly 25 percent.

[…] Proceeding with the takeover as planned, at $34 a share, would leave the company with very heavy debt — more than it can readily carry, many of the analysts say.

But the company may have little choice but to proceed. What if they gave Mr. Zell a better deal?

“The biggest risk to the deal is Zell getting cold feet and trying to reprice the deal, but we think that’s very unlikely,” one banker tells The Times.

Tribune will have to sell The Chicago Cubs and some other properties to finance the deal.