Business Insight Zone

The current Company of the Day is the Tribune Company.

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You have to hand it to Samuel Zell: he doesn’t pick boring sandboxes to play in. Over the past winter, he was involved in countless headlines when he elicited a bidding war between Blackstone Group and Vornado Realty, each of which was trying to buy out Zell’s Equity Office Properties real estate outfit. Blackstone prevailed with a final bid of nearly $40 billion, which put plenty of extra cash in Zell’s pocket for his next move: buying out the 160-year old Tribune Company, owner of the Chicago Tribune, many other newspapers, and Major League Baseball’s longsuffering Chicago Cubs franchise.

The planned sale of the Cubs may go much better than Zell’s plans for Tribune Company’s newspaper business. The Cubs, at least, sell out every game at Wrigley Field (which itself is worth a mint), and at this writing they’re even in first place in their division. Meanwhile, circulation numbers and advertising revenue at Tribune Company’s newspapers have been in steady decline for quite a while now. Yet despite the challenges in advertising presented by Google and others, Zell believes that the dead-tree newspaper business is still viable.

The markets would love to see Zell’s takeover of the Tribune succeed, especially since the ongoing credit crunch has torpedoed a lot of other deals. But even though Zell has the resources to weather the credit storm and go ahead with his planned purchase, the question remains whether he should. The Tribune Company’s operating problems are real and urgent, to the point that it’s considered good news when ad and circulation numbers drop less than they did last month, leaving alone any fantasies of actual growth. And the Trib’s challenges aren’t isolated. They affect the entire newspaper sector, which has seen consistent declines in profitability even for stalwarts like Gannett, McClatchy, and The New York Times Company. It may be that not even a canny operator like Zell can work his magic in a broken industry.

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