Tribune said to still favor Zell’s buyout bid

Tribune Co. continued to favor an acquisition proposal by real estate mogul Sam Zell, but a special committee of directors was asking questions Friday about a competing bid by Los Angeles billionaires Ron Burkle and Eli Broad.

The media conglomerate had hoped to bring an end to a torturous six-month review of alternatives by its self-imposed deadline of today. The talks are likely to continue into Sunday, however, in part because of the time needed to consider the 11th-hour counteroffer Burkle and Broad submitted Thursday.

Broad and Burkle responded to a series of questions from the company about their offer Friday afternoon, a person familiar with the situation said. The source did not speak on the record because Tribune has asked that the deliberations remain confidential. The two partners “remain committed” to a bid they value at $34 a share, the person said.

Zell has said his offer was valued at $33 a share. Tribune stock closed Friday at $32.11, up 58 cents.

Zell appeared to still be the front-runner to win Tribune, which owns the Los Angeles Times, KTLA-TV Channel 5, the Chicago Tribune, the Chicago Cubs baseball team and more than 30 other newspaper and television properties.

Zell proposes buying the company in partnership with an employee stock ownership plan, or ESOP, which would allow a new privately held Tribune to take a tax deduction on any principal and interest payments that flow through the plan. The tax break would effectively increase the company’s cash flow.

In January, Broad and Burkle proposed recapitalizing Tribune but were spurned by the company. The two billionaires indicated this week that they would adopt Zell’s ESOP model but contended that their offer was worth more in part because they would infuse the company with $500 million in equity. Zell, also a billionaire, has reportedly offered to put about $300 million of his own money into the deal.

A person who was closely following the talks said Zell’s plan was more fully formed but Tribune directors felt they must give a fair hearing to the counteroffer.

In a letter to Tribune directors last week, Broad and Burkle complained that they had not received the same financial information the company shared with Zell. Directors are said to be concerned that they could face litigation if it appears they favored one bidder over another.

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Times staff writer Michael A. Hiltzik contributed to this report.