Will Zell Lose His Zeal?

By my reckoning, Sam Zell has about a month to change his mind about taking Tribune (NYSE: TRB  ) private. Or perhaps the Chicago real estate tycoon can live with a seemingly unstoppable slide in the company's revenue and operating cash flow.

According to a memo written by David Hiller, publisher of the Los Angeles Times, and obtained by our friends at Bloomberg, the Times -- Tribune's largest property -- saw its advertising revenue fall yet again last month and its cash flow plummet by 27%. And according to Hiller, the results experienced by the Times coincided with those at the company's other properties. But the declines at Tribune apparently were more serious than those of the rest of the industry.

After a protracted drama in which several billionaires from areas outside of journalism cast bids for Tribune -- and its largest shareholder, the Chandler family, called for change -- Zell emerged victorious earlier this year. His $8.2 billion buyout proposal was based on the creation of a tax-advantaged employee stock ownership plan. The company's shareholders are scheduled to vote on the plan on Aug. 21.

But the privatization would occur amid a worsening plight for the nation's daily newspapers. This past May, advertising revenue from continuing operations at New York Times (NYSE: NYT  ) dropped by 8.5%. And declines in publishing revenue are occurring -- seemingly with no end in sight -- at such other major publishers as McClatchy (NYSE: MNI  ) , Gannett (NYSE: GCI  ) , and Media General (NYSE: MEG  ) .

On that basis alone, I'm admittedly at a loss to comprehend Zell's thinking. Sure, he's been successful in assembling a sizable fortune from astute investing in real estate, but I wonder how that success translates into an assumption that he can resurrect sliding newspaper fortunes sufficiently to maintain, or even increase, the cash flow levels that are so vital to high-debt privatized companies.

So it remains to be seen in the coming month whether Zell will think twice about becoming the sort of "press lord" that Warren Buffett talked about in a cautionary way in Berkshire Hathaway's (NYSE: BRK-A  ) latest annual report. In the meantime, it becomes more apparent by the day that publishing is anything but an ideal place for Fools in search of solid investment returns to dabble.

For related Foolishness:

Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your comments or questions. The Motley Fool has a very readable disclosure policy.   

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 532017, ~/Articles/ArticleHandler.aspx, 10/26/2016 9:30:52 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 14 minutes ago Sponsored by:
DOW 18,199.33 30.06 0.17%
S&P 500 2,139.43 -3.73 -0.17%
NASD 5,250.27 -33.13 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/26/2016 4:02 PM
GCI $9.90 Down -0.10 -1.00%
Gannett CAPS Rating: No stars
MEG $17.15 Down -0.11 -0.64%
Media General CAPS Rating: *
MNI $15.74 Down -0.41 -2.54%
The McClatchy Comp… CAPS Rating: *
NYT $11.40 Down -0.05 -0.44%
The New York Times CAPS Rating: **