The Chandler clause

Getting relatively little attention in today's stories about the Tribune announcement was a sentence buried in the press release. It relates to the terms of the Chandlers restructuring those two partnerships and it could become important as the company considers a sale. As part of the restructuring, the Chandlers own an additional 11.8 million shares of Tribune common stock, which gives them close to 20 percent ownership of the company. Here's the key point: the Chandlers have agreed to vote the additional shares in the same way as all other shareholders for 12 months from the date of distribution.

Here's why it's important: Even if hostile investors try to accumulate Tribune shares as part of some sort of takeover effort or proxy fight, the Tribune board will still have the Chandler shares to rely on. This isn't just a hypothetical. Activist shareholder Nelson Peltz bought a relatively small stake in Tribune earlier this year, and there was speculation about him lining up with the Chandlers. But that's not looking very likely at this point. What the partnership restructuring does do, as noted by the Chicago Tribune this morning, is provide some relief for CEO Dennis FitzSimons.

The stock, meanwhile, is up for the second straight day (it was just under $34 a few minutes before the close), indicating that Wall Street anticipates some sort of deal. But what? At first blush, a leveraged buyout would seem attractive because there is so much private money that would be happy to do the deal. But because of the company's high debt load, shareholders might not do that well. A.G. Edwards estimates an LBO would deliver $40-$45 a share, which is certainly better than the current depressed prices but well under what many believe is the asset value.

So what about selling to another company? Well, that's possible, but who would want it? Certainly not the other newspaper companies. As pointed out by Dow Jones reporter Shira Ovide, there was limited interest when Knight Ridder put itself up for sale last year.

That pretty much leaves either the sale of assets - 30 percent interest in the Food Network would bring in a few dollars - and perhaps a company restructuring. In that scenario, the LAT would almost certainly remain in Tribune hands. Why on earth would they want to unload the newspaper that generates the most revenues? They wouldn't. That's why the talk this week about the Times being sold - fueled by that waaaay over-publicized letter from the Gang of 20 urging the Tribune to add resources in L.A. - doesn't seem to square with reality.