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June 19, 2006

Is There Excess Value At Tribune?

One of the theories behind breaking up Tribune (TRB) is that the broadcast television assets are worth a significant premium to the current valuation of TRB shares. Recent TV station sales support this idea but an article last week in the Wall Street Journal there outlined the pressure that local TV stations are feeling. It makes me wonder if a breakup of TRB might not yield as much upside as some expect.

On the other hand, the New York Times has reported that several of the major private equity shops that specialize in media have already approached the Chandler family about either buying out their stake or partnering with the family on a buyout of TRB.

The Jounral articles notes that for now reasoningthe TV business is still basically OK which is what attracts private equity money. The question, though, is whether the 8 times EBITDA multiple for CBS (CBS) or the 12-14 times multiple of recent station sales are the correct valuations. It makes a big difference to your opinion of TRB.

I suppose TRB is a good place to hide given the heightened speculation about a breakup of the company. I still have this nagging concern that any restructuring short of a sale of the entire company will produce a stock price that falls far short of bullish estimates north of $40. The depressed valuation of CBS and the fact that pure play newspaper companies are trading at the same multiple as TRB are the source of my concern.

Posted by Steve Birenberg at June 19, 2006 09:30 AM in TRB