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Zell buys Tribune

Chicago real estate mogul Sam Zell may have won the big deal, but completing the purchase of the Tribune Company — with broadcast stations intact — may have some obstacles ahead.

Last week, the Tribune Company said it had accepted a proposal from Zell to take the troubled company private in an $8.2 billion dollar deal that allows the majority of the shares to be owned by employees. Even with minority ownership, Zell has the right to veto any major transactions.

Dennis FitzSimons, Tribune's chairman and president, said taking the company private would alleviate shareholder pressure to produce short-term profits and allow more planning for the future. "As a private company, Tribune will have greater flexibility to transform our publishing-interactive and broadcasting businesses with an eye toward long-term growth," he said.

There were, however, reports that Tribune employees were dismayed at Zell's success. Zell had said earlier that he has no interest in newspapers, and there were complaints that he has stated no vision for how to run the complex media company in a time of rapid change. No plan is on the table on how reverse declines in advertising across Tribune's outlets.

Then there's the matter of FCC licensees. Currently, Tribune has a waiver from FCC rules, which state that one company can't control a newspaper and a broadcasting license — radio or television — in the same market.

Tribune does just that in five markets — Chicago; Fort Lauderdale, FL; Hartford, CN; Los Angeles; and New York.

Republican FCC Commissioner Robert McDowell told MarketWatch last week there is nothing in FCC rules to suggest that a waiver from rules couldn't be extended to a new owner in the event of a transfer of control of broadcast licenses.

Dow Jones Newswires reported reservations on the part of Democrat FCC commissioners Michael Copps and Jonathan Adelstein about the Tribune waivers being extended to a new owner.

The FCC is currently reviewing the politically volatile issue of media ownership rules. FCC chairman Kevin Martin wants the rules relaxed. There is substantial opposition to such a change in the Congress.

McDowell said he has not yet decided his position on the need to reform the rules, but he said the FCC shouldn't alter regulatory treatment of companies while reconsideration of rules is ongoing.

In order for Zell's deal to proceed, the FCC would have to approve the transfer of 23 major market TV broadcast licenses that Tribune currently controls. In addition to the "Chicago Tribune," the company owns the "Los Angeles Times," the "Baltimore Sun" and "Newsday" of Long Island, NY. The FCC's regulatory powers don't extend to newspapers, but its cross-ownership rules do apply to print media.