Bidding War for Tribune Could Prove Newspapers Not Dead

A bidding war for a newspaper company?  Who would’ve thunk it?  Today’s New York Times reports:

The drama for control of the Tribune Company intensified last night as two Los Angeles billionaires put in a last-minute bid, topping an offer from the Chicago real estate magnate, Sam Zell, by a dollar a share.

The two billionaires, Ronald W. Burkle and Eli Broad, sent a letter last night to Tribune management prior to the company’s self-imposed deadline of Saturday, according to a person with knowledge of the proposal.

Now, the Tribune isn’t purely a newspaper company.  They own broadcast outlets and the Chicago Cubs, too.  Nevertheless, as I noted recently on the Disruptive Dialogue podcast, Mr. Zell has publicly acknowledged a more bullish look on newspapers than the blogosphere does.

There’s another catch, too.  Both offers rely on employee stock ownership plans (ESOP’s) to consummate the deal and both would ultimately make employees majority shareholders in the company.  Now, I’m not an expert on such things (this is where it would be good to have someone like resident blogopshere expert Paul Kedrosky weigh in).  But it appears that the ESOP would play the role that debt would otherwise.  I wonder if this suggests a degree of risk management by the potential buyers? 

I have a general familiarity with how ESOP’s work in a small business setting, but much less so as it relates to taking a public company private, in large part through an ESOP.  Indeed, the article makes the point that this is an untested model:

Both offers are based on a relatively unusual device of employee stock ownership plans, which have been successful for many small companies but have had mixed results for bigger companies.

Such plans, specialists say, have been virtually untested in the last two decades on companies the size of Tribune, which has about 20,000 employees.

Nevertheless, this interest in the Tribune Company should cause those declaring the death of print media to step back and consider whether the reports of its demise may be just a bit premature.