May 25, 2007 / 12:17 PM / 10 years ago

UPDATE 2-Tribune holders tender more shares than expected

(Adds details throughout, background, NEW YORK dateline)

By Robert MacMillan

NEW YORK, May 25 (Reuters) - Tribune Co. TRB.N said on Friday shareholders tendered almost twice as many shares as the media company sought to repurchase as part of an $8.2 billion deal to go private.

The publisher of the Los Angeles Times and Chicago Tribune had sought to repurchase up to 126 million shares at $34 a share, or about $4.3 billion, as part of a deal proposed by real estate magnate Sam Zell to take Tribune private.

The company said shareholders tendered about 224 million shares, or about 92 percent, of its outstanding shares.

Tribune said it would purchase 126 million shares on a pro rata basis, and reaffirmed its plan to buy the rest later this year.

“You’re getting $34 a share in May, or you’re getting $34 a share in November,” said Prudential analyst Steven Barlow. “Of course they’re going to be oversubscribed. Everybody and their cousin wants to get rid of it now.”

Under the deal with Zell, Tribune would be largely employee owned and have $8.4 billion in new debt.

Some analysts have said Tribune could have a tough time paying down that debt as its profits suffer from an ongoing slump in the newspaper business.

Tribune was originally seeking a $7.105 billion seven-year loan, offering a floating interest rate of 250 basis points over LIBOR, according to Reuters Loan Pricing Corp.

But lead arranger J.P. Morgan sweetened the terms last week partly because potential lenders were reluctant to commit to such a large and lengthy financing when Zell was offering so little equity.

Tribune secured a smaller $5.605 billion seven-year loan at a higher interest rate of 300 basis points over LIBOR, and borrowed the remaining $1.5 billion through a two-year loan paying 250 basis points over Libor, according to Loan Pricing Corp.

“Tribune is committed to reducing its debt load,” company spokesman Gary Weitman said. “Our businesses generate substantial free cash flow which is more than enough to cover our interest.”

The company’s loan agreements also contain some flexibility to handle its debt payments even if the newspaper business remains challenging, Weitman said. Tribune and other U.S. newspaper publishers are dealing with slowing advertising sales and circulation because of competition from the Internet.

The company has said it would sell the Chicago Cubs baseball team and a 25 percent interest in Comcast SportsNet Chicago to help pay down debt of over $13 billion.

Tribune shares were down 88 cents at $32.32 in afternoon trading on the New York Stock Exchange.

Three-month LIBOR is around 5.36 percent. The overall financing is led by J.P. Morgan, Merrill Lynch, Citigroup and Bank of America.

(Additional reporting by Tiffany Wu in New York and Shikhar Balwani in Bangalore)

((Editing by Toni Reinhold; Reuters Messaging:; 646-223-6012; e-mail: Keywords: TRIBUNE TENDEROFFER/

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