In its quest for business synergy through mergers and acquisitions, Tribune may have strode one step too far and transformed itself from M&A acquirer to M&A target. Known for more than a century as a family-owned, Chicago-centric publisher and broadcaster, Tribune went public in 1983 and has been expanding ever since. Its biggest acquisition by far was Times Mirror Co., owner of the Los Angeles Times and New York's Newsday. The deal was completed in June 2000 for $8.3 billion.

Now, six years later, that Times Mirror deal may prove Tribune's ultimate undoing. This summer, members of the Chandler family, the former longtime owners of Times Mirror and now Tribune's largest shareholder, began demanding a restructuring of their ownership position within the company. The restructuring would ease any tax burdens that might come from the sale of Tribune properties.

As recently as May, Tribune Chief Executive Officer Dennis FitzSimons was telling analysts that "our top three market assets are not for sale." By late September, however, that was no longer the case. In fact, the whole company is now in play.

On Sept. 21, Tribune announced a boardroom agreement to the restructuring demanded by the Chandlers. In addition, the company said it had formed a committee to explore "alternatives for creating additional value for shareholders."

That process, the company said, was expected to be complete by the end of 2006.

Tribune has grown primarily through the purchase of newspapers and television stations. It owns one radio station, the historic AM it first bought in 1924, WGN-AM in Chicago. The company has owned a few other radio stations, such as WQCD-FM in New York — a station it held in conjunction with its ownership of the Daily News in New York and its TV station there, WPIX.

Tribune sold the Daily News to Mortimer Zuckerman in 1993 and traded the FM station to Emmis Communications in the late 1990s for two TV stations, one in Seattle and one in Grand Rapids, Mich. Tribune still owns WPIX-TV.

Tribune ranks among the country's largest media companies, with 11 daily newspapers, 26 television stations, the cable network Superstation WGN and the Chicago Cubs baseball team in addition to Chicago's WGN-AM radio.

The company flagship, the Chicago Tribune, was founded in 1847, predating even the Great Chicago Fire. In 1855 Joseph Medill became editor and part owner. He was elected mayor in 1871 and led the city's reconstruction from the great fire. In 1924, at the dawn of the radio age, WGN went on the air in Chicago. Its call letters stand for "World's Greatest Newspaper." Tribune was again a pioneer when television was created, establishing WGN-TV in 1948 and WPIX-TV in New York City. In the 1960s, Tribune bought the Fort Lauderdale Sun-Sentinel and the Orlando Sentinel. Later acquisitions included the Cubs.

Tribune continued expanding when it bought KTLA-TV in Los Angeles for $510 million. But by far, the most ambitious acquisition was Times Mirror. The merger doubled the size of Tribune, which now ranks as the nation's second-largest newspaper and periodical publisher. In addition to the Times and Newsday, the company added The Sun in Baltimore, the Hartford Courant and four other newspapers to its stable. The merger made Tribune the only media company with newspapers and television stations in the top three markets in the U.S. — New York, Los Angeles and Chicago — as well as a dominant position in Connecticut.

Normally, owning a daily newspaper and television station in the same market is against FCC rules that are supposed to ensure "diversity, competition and localism." Tribune's domination in Chicago is permissible because the media combinations were in place before the cross-ownership rule was created in 1975.

FCC rules prohibit newspapers combining with radio or broadcast stations in the same marketplace, but the agency has granted a permanent waiver of that rule in four cases and has "grandfathered" about 50 other cases of similar media cross-ownership, including Tribune's Chicago combine. Bonneville International, a wholly owned subsidiary of the Church of Jesus Christ of Latter-day Saints, is allowed to own newspaper and broadcast properties in Salt Lake City, as is Cox Enterprises in Atlanta.

The justification for the waiver involves the situation where disbanding the cross-ownership would be "unduly harsh," meaning that the newspaper could not sell the commonly owned station, that the sale would be at an artificially depressed price or that the local community could not support a newspaper and a radio station that were separately owned.

Hence Tribune hasn't been able to fully exploit media properties obtained through its purchase of Times Mirror, even though Tribune bought Times Mirror with the expectation that the FCC would reject the newspaper-television cross-ownership rule. Together with the Newspaper Association of America trade association, Tribune continues to be the foremost advocate for repeal. Addressing the association in April 2006, FCC Chairman Kevin Martin urged newspapers to lobby more aggressively against the rule.

In June 2003, under former FCC Chairman Michael Powell, the FCC eliminated  newspaper-broadcast and radio-television cross-ownership limits, replacing both with a unified rule permitting cross-ownership in large markets — but prohibiting it in small markets and limiting it in mid-sized markets. A range of other media ownership rules were relaxed in the 2003 decision, which was halted by the 3rd U.S. Circuit Court of Appeals.

The changes to the newspaper-broadcast cross-ownership rule fare the best under the appeals court's decision, but the court still sent the rule back to the FCC. In June 2006, the FCC's Martin opened a new proceeding on the subject.

In New York and Los Angeles, where Tribune is technically out of compliance, nothing can happen until the broadcast licenses come up for renewal, which is not until 2006 for Los Angeles and 2007 for New York. Even with the Los Angeles license renewal deadline looming, the FCC's Martin has said he would likely keep all temporary waivers in place until the FCC concludes its new ownership rule proceeding.

A more important issue is the settlement Tribune reached with the Securities and Exchange Commission over allegations that the company inflated circulation figures at Newsday and the Spanish-language publication Hoy.

The SEC said that the two newspapers inflated their circulation figures during the years 2002-2004. Tribune has earmarked $90 million to reimburse advertisers who paid rates based on inflated circulation numbers.

— Tony Sanders

October 2006

Sources: ABCNews.com, Billboard Radio Monitor, Company Web site, Hoover's online, Securities and Exchange Commission filings

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Broadcast and cable results are based on Federal Communications Commission records downloaded on June 15 , 2006, and Sept. 5, 2006, respectively, and the latest corporate disclosure records available before Oct. 16, 2006. Newspaper results are based on data compiled from the latest available Editor & Publisher International Year Book figures on Sept. 29, 2006. For more information, visit the Media Tracker methodology page.

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Telecommunications, Media and Technology Contributions

Lobbying

Lobbying 1998-2006: $1,056,290

Trips

According to disclosure forms filed for privately sponsored travel between January 1, 2000, and June 30, 2005, this company did not solely sponsor any trips for members or their staff. This company may have co-sponsored travel with other entities. To investigate that possibility, use the Power Trips database.

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