Is Sam Zell Smart Like a Fox?

Lot’s of commentary about Sam Zell buying the Tribune company. I won’t bother linking to them all (because I’m too lazy tonight to go through the work of doing it).

Here are some of my comments, in no particular order.

Sam Zell is a legend in real estate and beyond for his ability to be counter-cyclical and his ability to rejuvinate depressed property. Come to think of it, that’s a much needed skill in the newspaper business right now. I wouldn’t bet against him just because he makes a couple of comments that Jason Calacanis doesn’t like.

It’s pretty remarkable that Zell is staking only $315 million of his own cash to anchor the $8.3 billion deal.

Perhaps the most staggering aspect of this deal is how little the 11 newspapers (including top 3 media markets) are worth. Tribune is a interesting diversified media and entertainment company, here’s some facts about what Zell just bought:   

  • The Chicago Cubs
  • 23 broadcast stations, including major network affiliates
  • Superstation WGN
  • Radio stations
  • Spanish language newspapers
  •,,, and a few other (47) websites
  • Television product production and distribution, including exclusives on Saving Private Ryan, Gladiator, and Shrek.
  • Tribune Studios is a movie set, equipment, and production company

When you strip out the non-newspaper assets and look at the comparable valuations, it’s pretty clear that the newspapers are dragging down the rest of the company. The newspapers employ a disproportionate number of people and are the only segments of the business that are actually declining in reach. It’s really a lot more complicated than suggesting the Internet alone is responsible for the decline of the newspaper business, but it really can’t be avoided any longer, the newspaper business is dying.

Lastly, there was an interesting comment from Dave Wner that caught my attention and underscored how the online world isn’t that different from the physical property world, in some respects.

It could be that Zell is brilliant, and is saying something that simplifies the truth to make a bigger point, and he doesn’t mind if you think he’s inept if some people get the bigger picture — which is he thinks of the Internet and Google as being the same thing, and you know what — I bet a lot of other people do too, and they have a point.

In real estate success comes from the old adage "location, location, location" but also from an ability to get someone else to take the financial risk (look at Trump to see this played to perfection, he gets the credit and someone else shoulders the risk), never paying too much for something, and selling when everyone else is buying and vice-versa.

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7 thoughts on Is Sam Zell Smart Like a Fox?

  1. Pingback Samuel Zell Needs to Understand the Web » SELaplana
  2. Tony,
    The way I read the deal is that the Trib Co. “intends” to sell the Cubs at the end of the baseball season, which means that the asset is part of the deal that Zell put together. Assuming the Cubs are sold Zell would then use the cash from the sale of the Cubs to pay down the debt, because by the end of the baseball season Zell should have this deal done.

  3. Clearly people are looking just the newspaper portion of the deal and saying, “Newspapers, that’s just crazy.” Jason Calacanis made his nut by drastically screwing writers at Weblogs Inc and paying them a pittance. I suspect that most people don’t understand the economics of newspapers. Newspapers, especially smaller regional papers can be quite profitable. Look at the other assets in the transaction. It seems like a good deal to me.

  4. Brian,
    You hit the nail on the head. Zell buys undervalued assets that still have intrinsic value. The Trib Co. has a diversified media business but the reality is that the newspaper business still generates the lion’s share of revenues. The stock has fallen over the last 2 years, about half it’s value has been wiped out yet the revenue only declined marginally in that period. Zell sees a business that is still economically viable even if it is dying (literally as readers themselves die off) but thinks he can make a return.

    Whether it’s a good deal or not will be left to history but it would be a tragic error to simply write it off as “Zell is going to lose billions” when 1) that’s impossible, he only has $315m of his own money in the deal, and 2) there is an interesting financial angle that is being ignored.

  5. Clearly if you can sell off or in this case probably restructure the non performing assets you are going to see a great upside. In this case the newspapers are dragging down performance of the stock while I am willing to bet that those 47 web properties have real value.

  6. Pingback Tribune Co Bankruptcy UPDATED: Black Monday — Tribune Co. Files for Bankruptcy | Venture Chronicles

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