It's becoming increasingly apparent that Tribune (NYSE: TRB ) is about to don a stethoscope and serve as its own physician in an attempt to heal its well-known maladies. Furthermore, it appears that the company's ministrations almost certainly will include the removal of more than one of its current parts.
Tribune has been the subject of all manner of scrutiny for the past several months. With its advertising and circulation numbers falling steadily, its largest shareholder, the Chandler family, asked the company last year to evaluate its strategic opportunities.
Tribune subsequently had itself poked and prodded by all manner of private-equity firms, as well as by a passel of Los Angeles and Chicago billionaires. The company also has received specific bids for particular properties of the company, such as an offer by music mogul and Los Angeles billionaire David Geffen for the Los Angeles Times newspaper.
The specific proposals Tribune gathered in January included a restructuring concept from two other Los Angeles business leaders, grocery-store magnate Ron Burkle and real estate investor Eli Broad. Along the way, News Corp. (NYSE: NWS ) CEO Rupert Murdoch expressed at least passing interest in Tribune's Newsday newspaper, which is published on Long Island. News Corp.'s properties include the New York Post.
Finally, and after the company's January deadline, Chicago real estate tycoon Sam Zell has advanced a scheme that would involve the creation at Tribune of an employee stock-ownership plan, with which he would share Tribune ownership. But Zell's proposal apparently would involve having Tribune undertake more debt than generally is considered prudent.
So now, it appears likely that Tribune's self-help restructuring will involve a sale of its 23-station television group, the disposal of its Chicago Cubs baseball team, and an increase in debt to facilitate the payment of a dividend to shareholders. But why borrow funds and then pay them out in a special dividend?
I'm glad you asked. By doing so, the company would provide its second-largest shareholder, a charity that is connected to Tribune management, the funds to purchase shares owned by the Chandlers, who seek to cash out on a portion of their Tribune holdings. The Chandlers collectively became Tribune's largest holders when they sold their Times Mirror Company to Tribune.
If the scenario apparently unfolding at Tribune proves accurate, we may witness yet another indication of the sad state of U.S. newspaper publishing today. Indeed, it appears that Scripps (NYSE: SSP ) is encountering difficulty in its efforts to divest its newspaper group. Beyond that, I believe it would border on the cavalier to assume that we won't witness further ownership rumblings at New York Times (NYSE: NYT ) during the next year or two, and even a deal at Dow Jones (NYSE: DJ ) is not beyond the realm of possibility.
So for a host of reasons, a once-thriving business -- one still represented by a number of grand old names -- continues to struggle. As in the past, I urge you not to be lured into including shares of newspaper publishers in your portfolio.
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Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your comments or questions.
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