Shareholders filed a class-action lawsuit against Tribune Co. Thursday that alleges the $8.6 billion bid by Sam Zell to buy the company for $34 per share was rigged.
The complaint filed in Cook County Court says Tribune dismissed bids from billionaire investors Eli Broad and Ronald Burkle that were equal to or higher than Zell’s.
Broad and Burkle offered $34 per share in March 2007. “Indeed, the Board had already rejected these two bidders twice; first, on July 2006, when defendants unequivocally rebuffed offers from Broad, Burkle and entertainment mogul David Geffen to purchase the ‘Los Angeles Times’ from Tribune at a substantial premium” according to the lawsuit.
The lawsuit says Tribune initially dismissed the $34 per share offer from Broad and Burkle because it did not include an Employee Stock Ownership Plan, but the duo revised its proposal to include a ESOP structure and that’s when “the Board—in order to keep their promise to Zell—cut short the so-called bidding process.”
“The proposed acquisition favors the Company’s management and major insider shareholders at the expense of and to the detriment of Tribune’s public shareholders,” the lawsuit claims.
The shareholder class-action alleges breach of fiduciary duty and asks the court rescind the proposed acquisition. It was filed by attorney’s from the firm Lasky and Rifkind, Ltd.
In Connecticut, Tribune owns The Hartford Courant and television stations WTIC and WTXX. It recently sold the Greenwich Time and The Advocate of Stamford newspapers to Gannett Co.