Report: Geffen still wants to buy Times

CHICAGO – Movie and music mogul David Geffen is negotiating with Sam Zell on a possible deal for the Los Angeles Times following Zell’s successful bid for Tribune Co., a published report said Thursday.

Geffen has spoken with Zell since the Chicago real estate magnate’s $8.2 billion deal to acquire Tribune was announced Monday, and is optimistic he may gain control of the Times in either a spinoff or joint-venture partnership, the Washington Post reported, citing an unidentified source.

The report quoted Geffen as saying Wednesday: “Yes, I continue to want to buy the Los Angeles Times.”

Representatives for Zell and Geffen declined to comment Thursday.

The Los Angeles Times is the largest of Tribune’s nine daily newspapers that will change hands later this year under the deal, which calls for Zell to invest $315 million and take on $5 billion in existing company debt while converting the company to employee ownership.

Zell has indicated he does not intend to break up the company, aside from selling the Chicago Cubs baseball team. But analysts have said the Times or other assets still could be sold if they attract premium prices that would compensate for any additional tax burden, or in staged, tax-free spinoffs.

Under employee stock ownership, Tribune will gain tax benefits that would enable Zell to sell individual assets with fewer tax penalties, said Lisa Van Fleet, leader of the employee benefits practice group at Bryan Cave, a law firm specializing in labor law.

Geffen’s original $2 billion offer for the Times was rejected by Tribune in November.

The California billionaire, who founded DreamWorks SKG studios with Steven Spielberg and Jeffrey Katzenberg, has said he thinks the Times should feature more local coverage and improve its national and foreign reports and opinion pages.

Two other Southern California billionaires whose offer for Tribune was rejected, Eli Broad and Ronald Burkle, have met with their advisers this week amid speculation they could make a new offer. The Zell deal, which carries a breakup fee of only $25 million, isn’t expected to close until the fourth quarter.

Analyst Dave Novosel of Gimme Credit, a research service specializing in corporate bonds, pegs the Times’ value at as much as $2.4 billion and says unloading it without a tax burden would make sense since there is little synergy between the Times and Tribune’s other newspapers.

“Clearly a sale of the Chicago Cubs will not be sufficient to significantly reduce the massive leverage that will be implemented at Tribune,” he wrote in a research note Thursday. Under the Zell deal, debt at Tribune is expected to almost triple to $13.4 billion.

Besides newspapers and the Cubs, Tribune’s holdings include 23 television stations as well as Internet ventures.

Tribune shares fell 1 cent to $32.75 in afternoon trading on the New York Stock Exchange.