{"id":2942,"date":"2007-06-23T21:37:26","date_gmt":"2007-06-23T21:37:26","guid":{"rendered":"http:\/\/zmetro.com\/?p=2942"},"modified":"2007-06-23T21:37:26","modified_gmt":"2007-06-23T21:37:26","slug":"interesting_loo","status":"publish","type":"post","link":"https:\/\/www.zmetro.com\/?p=2942","title":{"rendered":"Interesting Look at Sam Zell’s Tax Advantaged Structure of the Chicago Tribune Acquisition"},"content":{"rendered":"

Joe Nocera<\/a>: <\/p>\n

As Zell deals go, this hardly ranks among his biggest; he\u2019s putting up a \u201cmere\u201d $250 million to gain control of a company with $5.5 billion in revenue last year. But what it lacks in economic heft, it more than makes up for in complexity. When the deal closes, probably at the end of the year, the Tribune Company will go from being a public company to a private S corporation, meaning it will pay no corporate taxes. Its sole owner will be an employee stock ownership plan, which is essentially a fund, owned by employees, which owns the company\u2019s stock. ESOPs also pay no taxes, meaning that both the company and its owner will no longer be taxpayers. Mr. Zell, who will become chairman of the company, will immediately recoup his $250 million and then reinvest an additional $315 million (don\u2019t ask). He\u2019ll have an option to buy 40% of the company for another $500 million to $600 million. (If he does so, he will become the one taxpayer in the deal.)
\nThe Tribune Company will be laden with debt, $13 billion in all, which it plans to pay down in part with the extra cash flow that is generated from not having to pay taxes. If the company does well \u2014 or even just decently \u2014 everyone will make out, starting with the employees whose stock in the ESOP will be worth a lot more than $28 a share, the discounted price the ESOP paid for it. But if it continues to sink \u2014 and just this week, the Tribune Company announced that May revenue fell 11.1% \u2014 then the company could wind up in default, which would hurt everyone, starting, again, with the employees, who would lose the value of their ESOP shares. …
\nWhat most seemed to excite him was the ESOP itself. And why not? As the Lehman Brothers tax expert Robert Willens said, \u201cHe is using it in a way that no one has ever done before.\u201d Mostly, ESOPs are set up when family owners want to cash out of privately held companies and turn them over to their employees. Mr. Zell, by contrast, is using it to buy out the shareholders of a large public corporation \u2014and turn it into a tax-free private company.<\/i><\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

Joe Nocera: As Zell deals go, this hardly ranks among his biggest; he\u2019s putting up a \u201cmere\u201d $250 million to gain control of a company with $5.5 billion in revenue last year. But what it lacks in economic heft, it more than makes up for in complexity. When the deal closes, probably at the end […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6,32,23],"tags":[],"_links":{"self":[{"href":"https:\/\/www.zmetro.com\/index.php?rest_route=\/wp\/v2\/posts\/2942"}],"collection":[{"href":"https:\/\/www.zmetro.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.zmetro.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.zmetro.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.zmetro.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2942"}],"version-history":[{"count":0,"href":"https:\/\/www.zmetro.com\/index.php?rest_route=\/wp\/v2\/posts\/2942\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.zmetro.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2942"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.zmetro.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2942"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.zmetro.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2942"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}