Several big investors raise stakes in Tribune
Several investment companies that are among Tribune Co.’s largest shareholders bought more of the stock in the third quarter, betting on a higher share price for the beleaguered media company, financial reports show.
Two major investors who raised their stakes in Tribune, which owns the Los Angeles Times, said a sale or breakup of the company now appeared inevitable.
“I don’t think you can put the rabbit back in the hat,” said John W. Rogers Jr., chairman of Ariel Capital Management, which owns about 6.6% of the company’s shares.
Tribune’s board put the firm up for auction in late September under pressure from disgruntled shareholders. Rogers said that the board was doing the right thing in seeking to unlock the true worth of Tribune’s assets by inviting bids.
“We just think there is a lot of value there,” Rogers said, repeating a theme he has stressed all year. He declined to say what he thought the stock was worth.
On Wall Street, many investors remain skeptical of how much Tribune shares might fetch in a buyout or breakup. The stock reached $33.99 on Sept. 22, a 52-week high, but has since pulled back.
People familiar with the bidding say potential buyers, including private equity firms, haven’t offered much more than what the stock has been trading for recently.
The shares slipped 40 cents to $32.06 on Tuesday. They are up 6% year to date.
Ariel, based in Tribune’s hometown of Chicago, raised its stake in the company to 15.7 million shares as of Sept. 30, from 14.9 million on June 30, an increase of more than 5%, according to the investment firm’s latest financial filings with the Securities and Exchange Commission.
Investment companies are required to publicly disclose their stock holdings at the end of each quarter. Third-quarter filings were due to the SEC on Tuesday, although not all shareholders may have met that deadline.
Another big buyer in the quarter was Gamco Investors Inc., a Rye, N.Y.-based investment firm headed by Mario Gabelli, who has long been a high-profile player in media stocks.
Gamco’s stake in Tribune jumped to 3.3 million shares, or 1.4% of the company, as of Sept. 30, from 1.1 million at midyear.
Barry Lucas, who advises Gabelli’s institutional investing arm, said he believed that Tribune was worth at least $39 a share. The company, he said, has “some pretty enduring franchises” in The Times, Newsday, the Chicago Tribune and other properties, including 25 TV stations and the Chicago Cubs.
He also said he expected the company to be sold or broken up.
“I think it’s a lot less likely that it remains intact” as a publicly traded company, Lucas said. He cited pressure from the Chandler family of Southern California, which owns about 20% of the stock and launched a revolt against management in June, saying the company was pursuing a “failed strategy.”
Mutual fund company T. Rowe Price Associates also raised its stake in Tribune in the third quarter, according to the company’s latest filing with the SEC. The firm controlled nearly 17 million shares, or 7.1% of the company, as of Sept. 30, up from 15.6 million at midyear.
A spokesman for T. Rowe Price in Baltimore said he couldn’t comment on the holdings. A large block of the stock is held in the T. Rowe Price Equity Income fund, which targets companies it believes to be undervalued.
Optimism about a significant payoff from Tribune stock isn’t shared by Lord, Abbett & Co., an investment management firm based in Jersey City, N.J.
The company slashed its stake in Tribune from 8 million shares at midyear to 3.6 million as of Sept. 30, financial filings show.
“We felt we had more exposure than we wanted,” said Robert Morris, director of equity investments at Lord Abbett.
As a long-term investor, Lord Abbett has doubts about the growth prospects of Tribune and other media companies amid declining newspaper circulation and falling advertising revenue, Morris said.
“While these companies do generate cash, if they can’t grow they’re less attractive to long-term investors than to someone who wants to harvest that cash,” he said, referring to investment groups that might be interested in taking Tribune private or breaking it up.
The relatively low bids Tribune has received from potential buyers have divided the Chandler family, The Times reported Tuesday. Some in the clan -- the original owners of The Times -- had raised the issue of whether the family should launch its own offer for Tribune, according to the report.
People familiar with the auction process said the company had received four preliminary bids from private-equity investors, as well as one from media titan Gannett Co. and another from Los Angeles billionaires Eli Broad and Ron Burkle.
None of the offers is binding. Tribune’s board has said it expects to make a decision on the company’s future by year-end.
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Share shuffling
Here’s a look at net buying or selling of Tribune Co. shares in the third quarter by some of the company’s biggest institutional investors. Figures may include stock held on behalf of clients and not solely at the investment companies’ discretion.
No. of Tribune shares owned (in millions)
*--* Pctg. Investment company June 30 Sept. 30 change T. Rowe Price Associates 15.6 17.0 +9.0 Ariel Capital Management 14.9 15.7 +5.4 Vanguard Group 5.8 5.4 -6.9 State Street Corp. 6.4 4.8 -25.0 Lord Abbett & Co. 8.0 3.6 -55.2 Gamco Investors 1.1 3.3 +200.0 Fidelity Management 2.9 3.1 +6.9 Mackay Shields 1.6 1.9 +18.8
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Sources: Company filings, Bloomberg News
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