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June 09, 2006

The Journal Stays on the Tribune Case

The Wall Street Journal had another front page article on Thursday about Tribune (TRB), followed by a Heard on the Street column on Friday. Both articles suggest a potential restructuring or sale of Tribune (TRB) might be more likely than I had assumed.

My key takeaway from the latest articles is that TRB's future could move beyond control of current management and the Board. However, I think Chris that both the Chandler family and TRB are conservative entities that aren't likely to move quickly on a sale or split of the company unless forced by outside parties.
I think a sale would probably occur near $40, so there is upside in the event if it occurs. A split of the company into separate broadcasting and newspaper stocks would produce similar value. The excess value vs. the current stock price would come from placing private market values of 10 times newspaper EBITDA and 12-14 times broadcasting EBITDA. Presently, TRB trades at 9 times EBITDA.

The articles continue to push TRB shares higher. I stand by my analysis that barring an outright sale, the upside in TRB shares will be dictated by improving fundamentals as measured by renewed revenue growth. I don't see that on the horizon. Additionally, the breakup of Viacom shows that separation doesn't necessarily result in the higher multiples that are assumed. Consequently, I am wary of chasing TRB shares and would remain on the sidelines.

Posted by Steve Birenberg at June 9, 2006 12:31 PM in TRB