by David Carr reviews former L.A. Times editor James O’Shea‘s new book “The Deal From Hell: How Moguls and Wall Street Plundered Great American Newspapers.”
The book focuses largely on the deal that lead to Sam Zell‘s disastrous takeover of the Tribune Company — which owned the Chicago Tribune and L.A. Times among many others and is now in bankruptcy — in 2007.
O’Shea reports that Wall St. greed had much to do with Zell’s ability to borrow $12 billion to takeover a newspaper company despite the fact he had zero experience in the industry. Says Shea: “they were basically doing billion dollar loans with a wink and nod.”
JPMorgan ran the deal, but other banks, including Citibank and Bank of America took part. There were two separate rounds of funding to raise the approximately $12 billion that Mr. Zell borrowed to take the Tribune Company private. The banks received an eye-popping $161 million in fees for just the first round — a number sufficient to run The Los Angeles Times newsroom for a year, as Mr. O’Shea points out — and a total of $283 million in fees for both rounds.
He also reports that Jamie Dimon, the head of JPMorgan expressed some doubts about the fundamentals of the deal based on his firm’s analysis, but ultimately the bank decided to keep Mr. Zell’s business. JP Morgan was a substantial lender in the deal as well, lending hundreds of millions of dollars, and will share in the pain of the bankruptcy.
Of course, it’s unfair to say the implosion of the Tribune deal tanked the entire newspaper industry — the digital revolution has obviously played a major role. But dealt a mortal blow? In hindsight it appears that way.
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