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Rich Boys buying Corporate Toys

By Steven Pearlstein, Los Angeles Times-Washington PostNews Service

When they come into money, men are known to go out and buy houses or sports cars or yachts. But when they come into lots and lots of money, some men can't resist the urge to buy corporate playthings. Really big companies. Companies in trouble. Companies in industries that they know very little about.

It began last week with the announcement that Sam Zell, who just sold his real estate empire to the Blackstone Group in a deal valued at $39 billion, would use $315 million of the proceeds to buy the ailing Tribune Co. in a complex deal valued at $13.2 billion. As the owner of big-city newspapers and television stations (including the Baltimore Sun), Tribune is in the midst of trying to make the painful transition from the old media to the new.

As yet, there are no indications that Zell has thought deeply about that transition or figured out how to stanch the decline in advertising revenue. Instead, what he has offered is a highly leveraged financing plan and an employee ownership structure that will give him a giant tax break and give workers a piece of the action, albeit without any say in how the company is run.


Even before the ink was dry on the deal, however, Zell had set up a meeting with David Geffen, the Hollywood wheeler-dealer, who is just one of several Los Angeles zillionaires hoping to persuade Zell to break off a piece of his new Tribune empire and sell the Los Angeles Times.

Of course, whatever the problems of media companies, they pale in comparison to the challenges faced by the Big Three auto companies.

But apparently that's what attracted Kirk Kerkorian to make a $4.5 billion offer for Chrysler last week. This is Kerkorian's second run at Chrysler in 17 years, and it comes just months after his failed attempt to force a restructuring of General Motors.

He faces an uphill battle not only with the autoworkers union but also with executives at the parent company in Germany, whom he accused of snookering him and other investors to win approval of the DaimlerChrysler merger in 1998.

Kerkorian is not the only bidder for Chrysler. In addition to a number of private-equity firms, there is also Canadian auto parts magnate, horse breeder and racetrack owner Frank Stronach. Stronach rightfully claims to know a thing or two about the auto business and dealing with the UAW. But even he has offered few details on how to turn a money-losing operation with mediocre products and $15 billion in unfunded retiree obligations into anyone's pot of gold. (Gulf News)


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