Or as we say down here in the South, "root hog, or die."
Cramer is on the warpath:
http://www.bloggingstocks.com/2007/04/02/cramers-thoughts-on-tribune-buyout/
Cramer's thoughts on Tribune buyout
Posted Apr 2nd 2007 1:40PM by Brent Archer
Filed under: Analyst reports, Deals, Industry, Private equity, Tribune Co. (TRB), Options, Technical Analysis
Tribune Co. (NYSE: TRB) opened at $32.85. So far today the stock has hit a low of $32.11 and a high of $33.10. As of 12:25, TRB is trading at $32.95, up $0.84 (2.6%).
After hitting a one year high of $34.28 in September, the stock has trickled downward over the past several months until recently catapulting back up the charts on news of its impending buyout. The stock is rising still today after accepting an $8.2 billion private equity buyout offer from real estate investor Sam Zell. While investors are eating the deal up, Jim Cramer is up in arms. The buyer can afford to take a big hit, Cramer says, but he fears that it's the employees who will pay dearly, and with Tribune's new owners having zero experience in the newspaper business, he is skeptical about the company's future prospects. Cramer even goes so far as to say that bankruptcy may be imminent. The technical indicators for TRB have been bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bearish hedged play on this stock, I would consider a January bear-call credit spread above the $35 range. TRB has not been above $35 since late 2005 and has shown resistance above $34. This trade could be risky if the current $34 bid gets upped in a bidding war, but given the outlook for the newspaper business, this is a relatively low probability event.
More.
Jim Cramer Blog
Lack of Financial Acumen Burns Papers
By Jim Cramer
RealMoney.com Columnist
4/2/2007 9:41 AM EDT
URL: http://www.thestreet.com/p/rmoney/jimcramerblog/10348006.html
Why are almost all newspapers so poorly run financially? Why did Tribune (TRB) borrow money to buy back stock so high? Why did The New York Times (NYT) do the same thing, too? Why did Knight Ridder buy back stock endlessly -- sometimes at much higher prices, too?
This pattern is particularly unnerving because all of these companies are so challenged in their basic businesses. They could have spent to build up Web operations. They could have created their own sites to keep the value to the companies. But instead they all tried to develop Web companies that could come public. They didn't get there in time to beat the closing of the IPO window.
Tribune was particularly egregious. This company never did anything Web-wise, with management endlessly thinking that its stock was undervalued. It was clearly overvalued, and now the upside is totally capped. The little amount that Sam Zell is putting up to take this company private shows how little these companies are really worth.
All of these companies seem to be run, frankly, by jokers or dreamers who had no idea how to deploy capital. The only explanation I can think of is that they were run by people who are up from the newspaper side or are heirs to the founders and had no idea what they were doing financially. Dow Jones (DJ) was like that for years, and it is finally being run in an intelligent financial way. Probably too late, though.
These are diminishing assets. They don't need to exist. Younger people rarely read them. And the companies acted like they would always be in demand and were simply misunderstood by Wall Street. Nope, Wall Street got it the whole time, except a couple of hedge and mutual funds that are trapped and trying to get managements to do something to bring out value.
The result? The Philadelphia Inquirer gets wrecked. The Times boosts the dividend well beyond its means. And now the Tribune sets the stage for a massive downsizing, massive firings and the inclusion of tons of Associated Press copy.
Great. Just great.
More.
Jim Cramer Blog
Just How Stupid Is Tribune Deal?
By Jim Cramer
RealMoney.com Columnist
4/2/2007 8:04 AM EDT
URL: http://www.thestreet.com/p/rmoney/jimcramerblog/10347942.html
Every now and then, a deal surfaces that is so stupid and egregious that you just can't believe it can be allowed to go forward. That's how I feel about this incredible plan to use the employees' life savings to finance a bid for Tribune (TRB) .
Let's count the ways that this is so stupid.
First, there's really very little skin in the game for the buyer. They aren't doing anything much at all other than putting to work a small amount of their personal capital to gain the editorial voice they want and to allegedly streamline the businesses.
Of course, they know nothing about the newspaper business, which, in some peculiar ironic twist, is supposed to be "good" because papers are being run so economically poorly. I can only presume that means if you fire everyone, run AP copy and break the unions, you can make more money. I figure as soon as things go bad, they can walk away because, despite any protestations to the contrary, these men are like countries; they can afford to lose whatever they want. And they will.
Second, we know that the only real free lunch on Wall Street is diversification, yet this concentration of retirement money in one asset -- the same asset as where their paycheck comes -- is the definition of reckless. No one with a degree of savvy in his right financial mind would participate in this nonsense where, if things go bad, you lose both your nest egg and your paycheck.
Third, we saw this kind of recklessness backfire in the '80s with the Carter Hawley Hale ESOP, a pretty darned good department store that went down the drain and the workers lost everything.
Fourth, I cannot think of a worse industry for an ESOP bailout. Cash flows are falling so fast that it would not be surprising to me to see this company go bankrupt within three or four years of the deal. In fact, I may be too generous. If the negative industry trends continue, there will be huge layoffs, and the retirement funds needed to protect those fired won't be there. That would then precipitate federal help for which we'll all pay. Newspapers are in a secular decline, and nothing can stop that. If you take a look at the situation with two different fine papers -- the Philadelphia Inquirer, which is just hemorrhaging, and the Minneapolis Star, which was just fire-sold, you know what I am talking about. Both were strong franchises as recently as a decade ago.
Fifth and final is a word to the wise of employees: Fight this. Fight this hard, or leave now and take your retirement funds with you or cash out if you can. I have been in contact with several high-level employees, both corporate and journalism, and it is clear to me that no one at the Tribune has a darned clue about what is really happening and how things work. This is going to be a disaster -- and I respect the work of both teams of buyers.
If we had a Labor Department, it would put a stop to this pronto. Of course, we have a Department of Capital, and it loves these deals, because it could care less about anything but compiling labor statistics. Classic late-stage capitalism at work.