Thursday, October 26, 2006

Missing the Overall

Over at Goatriders, "Pestilence" Byron pens a piece on a possible suitor for the Tribune. It's a good article and correctly describes how private equity firms operate.

What the piece fails to do is truly connect the dots between Blackstone Group and the Trib other than to note that Blackstone is seeking more cash for its fund.

Byron's logic seems to be: Blackstone seeking cash + Trib price means Blackstone needs more cash + Trib in play = Blackstone possible suitor for Trib.

Now, that's certainly possible. Blackstone has made multiple investments in the media arena including Aldelphia and Bresnan Communications. It also possible that Blackstone has something completely different in mind. In fact, given the number of companies that could possibly be bought, it's more likely they are interested in another company.

If you want to see what a private equity firm does when they have a specific target in mind, look no farther than Chicago-based Madison Dearborn Partners LLC. They were in the news yesterday:

John Madigan, the former Tribune Co. chairman and chief executive who went on to become a special partner at Madison Dearborn Partners LLC, is taking a leave of absence from the Chicago-based private-equity firm, Chief Executive John Canning confirmed Tuesday.

Madison Dearborn is among the numerous buyout firms weighing whether to make a bid for the Chicago-based media company, which might put all or parts of itself up for sale. Tribune owns the Chicago Tribune, the Los Angeles Times, WGN-TV, various other media properties and the Chicago Cubs.

Madigan is stepping aside to avoid any appearance that he could be involved in any talks until Tribune's future ownership structure is sorted out.

Now, THAT's a sign of a potential buyer.

To be clear, we're not bashing Byron here. It's just that there's no clear connection between Blackstone's actions and the Trib.

Not so for Madison Dearborn.

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