Enron 2?
Something doesn't make sense to me involving the purchase of the Tribune Company. To me it has the makings of an Enron-like deal where the rich get richer, and the employees are left with nothing.
Riddle me this.
The Tribune in essence buys itself, giving itself to its employees in an Employee Stock Ownership Plan (ESOP). It does this with a $200 million loan from new billionaire chairman Sam Zell , a $50 million investment in newly issued stock by Zell, and more than $8 billion in financed debt. Zell's loan could be converted into shares at $34 (the shareholder buyout price).
Zell then invests another $65 million, he's now in $315 million. Out of that he now gets a warrant that allows him to bring his stake in the company up to 40 percent for an additional $185 million.
Let's recap.
Tribune, still turning a profit, but in a declining market (newspapers). Company has existing debt (roughly $5 billion). The company currently has a market cap of $7.88 billion.
All shareholders, including a family with a 20 percent stake, get to cash out at a premium price. Zero risk going forward for them.
Employees will now have the bulk of their pension saddled by company debt. In a declining market, I would assume this leaves them with a high risk.
BILLIONAIRE Sam Zell invests $500 MILLION in $8 billion dollar company and ends up with 40% of company. Looks like he is walking away with a steal, while potentially screwing all the employees of his new company.
Company finances bonds that will leave them with a $700 million yearly debt payment.
It's entirely possible that I am missing here, and please correct me if I am. In fact, I hope someone does correct me. This deal just leads me to believe that every employee of the company is getting screwed, while at the same time the super rich shareholders are walking with cash.
Riddle me this.
The Tribune in essence buys itself, giving itself to its employees in an Employee Stock Ownership Plan (ESOP). It does this with a $200 million loan from new billionaire chairman Sam Zell , a $50 million investment in newly issued stock by Zell, and more than $8 billion in financed debt. Zell's loan could be converted into shares at $34 (the shareholder buyout price).
Zell then invests another $65 million, he's now in $315 million. Out of that he now gets a warrant that allows him to bring his stake in the company up to 40 percent for an additional $185 million.
Let's recap.
Tribune, still turning a profit, but in a declining market (newspapers). Company has existing debt (roughly $5 billion). The company currently has a market cap of $7.88 billion.
All shareholders, including a family with a 20 percent stake, get to cash out at a premium price. Zero risk going forward for them.
Employees will now have the bulk of their pension saddled by company debt. In a declining market, I would assume this leaves them with a high risk.
BILLIONAIRE Sam Zell invests $500 MILLION in $8 billion dollar company and ends up with 40% of company. Looks like he is walking away with a steal, while potentially screwing all the employees of his new company.
Company finances bonds that will leave them with a $700 million yearly debt payment.
It's entirely possible that I am missing here, and please correct me if I am. In fact, I hope someone does correct me. This deal just leads me to believe that every employee of the company is getting screwed, while at the same time the super rich shareholders are walking with cash.
posted by Jeramey @ 4/07/2007 02:01:00 AM
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