The ivy is still on the wall. The writing no longer is.
Tribune Co.’s plans to sell the Chicago Cubs, announced more than 13 months ago and supposedly on track to be completed this year, now may be delayed as the Chicago Tribune’s parent continues to negotiate with the Illinois Sports Facilities Authority in pursuit of an advantageous way to sell and renovate Wrigley Field, the team’s home for more than 90 years.
After Tribune Co. rejected the authority’s latest proposal as creative but unworkable, sources said that the media conglomerate is privately indicating it might hold off selling the ballclub if the inevitable need for costly repairs at the antiquated ballpark significantly discounts the bids it fields for the team.
Heavily leveraged since going private late last year in an $8.2 billion deal engineered by real estate magnate Sam Zell, Tribune Co. bought itself a little breathing room on a Cubs sale, or at least a plausible negotiating stance, with this week’s announced $650 million transaction for control of Newsday, according to analysts. The deal for its Long Island, N.Y., newspaper gives it a financial cushion for this year, but not forever.
Tribune Co., which acquired the Cubs and Wrigley Field in 1981, remains in talks with the state agency for it to possibly acquire and pay for an estimated $400 million in renovations to the aging baseball shrine, Major League Baseball’s second-oldest ballpark, as well as neighborhood improvements and additional parking.
It is estimated that structural repairs can be delayed no more than 10 to 15 years, and there is considerable financial incentive to modernize the ballpark’s high-priced suites as soon as possible to put it on a par with similar moneymakers in other professional sports facilities.
Tribune Co. shot down the state agency’s latest proposal, which was structured to counter public criticism by funding the overhaul without state or city tax money. But neither side will rule out an agency deal of some sort for the ballpark, which would enable the team to be sold separately and maximize the potential return for Tribune Co., despite a Chicago Sun-Times report Tuesday that the company now planned to peddle the team and ballpark privately.
Former Illinois Gov. James Thompson, who heads the state agency, said Tuesday on Tribune Co.-owned WGN-AM 720 that the deal “still has life as far as I’m concerned” and that he planned “to act properly by going back to Sam Zell and negotiating further.”
Cubs Chairman Crane Kenney said Tribune Co. would leave its options open by continuing to work “with the city and state and, at the same time, begin the private process to explore interest in the team, stadium and our ownership interest in Comcast SportsNet.”
Zell, Tribune Co.’s chairman and chief executive, said in a call with lenders last month that he expected to sell the baseball team “sometime this year,” regardless of what happened in negotiations with the state over Wrigley.
Indeed, the team’s so-called book of confidential financial data has been sent to Major League Baseball for review, with and without ownership of the ballpark included. But the book has not been forwarded yet to MLB-approved bidders, numbering at least a half-dozen groups.
Sources involved in the bidding process said word is filtering back to those potential buyers that Tribune Co. is saying it will hold onto the team rather than sell at distressed prices if would-be buyers drop their prices too steeply in anticipation of having to pay for Wrigley Field renovations themselves.
Zell, who invested in Jerry Reinsdorf’s Chicago White Sox franchise, is seen as having an important ally in Reinsdorf if he does decide to retain the team, which requires approval of other Major League Baseball owners.
Tribune Co.’s deal with Cablevision Systems Corp. for Newsday, set to close this summer, has made that a viable option, at least for a while.
Tribune Co. is on the hook to pay its banks $650 million on Dec. 4, money it originally anticipated would come from a Cubs sale. But the Newsday deal will reap $630 million in cash that can be applied to that payment, and Tribune Co. has about $200 million in cash that can be drawn upon to pay the rest, said Mike Simonton, an analyst with Fitch Ratings in Chicago.
Depending on market conditions, analysts also estimate Tribune Co. will generate between $150 million and $200 million in cash flow this year, which also can be used to pay down debt.
The respite is only temporary, however, in that Tribune has to pay another $750 million on June 4 of next year, Simonton said. Fitch believes that cannot be funded through internal cash sources, so Tribune likely will have to sell another big asset by then.
Besides the Cubs, the most likely candidate is Tribune’s nearly one-third stake in the Food Network cable channel, which analysts estimate could fetch more than $800 million. But since it also generates a lot more cash flow than the Cubs — cash that helps pay the debt service — Zell likely would prefer to sell the sports franchise.
The downside of selling the team and ballpark, which Tribune Co. acquired for $20.5 million, is the huge capital gains tax hit that comes with the transaction and cuts into a possible $1 billion windfall, which is why the company is eager to avail itself of any and all edges it can.
Mayor Richard Daley said he didn’t know if the potential for a state-Tribune Co. deal for Wrigley falling apart was good or bad for the public.
“No one’s brought that up to me,” Daley said. “Remember, it’s a private business. They make millions and millions of dollars. Every one of those ballplayers, take their salaries. Take the amount of money that they make. I mean, just, people are purchasing tickets. The salaries of the baseball players. This is a big business. This is not a non-for-profit. It’s a big business, and they make money.”
———-
philrosenthal@tribune.com
mdoneal@tribune.com
