On a recent Wednesday afternoon, Sam Zell, the iconoclastic Chicago businessman, breezed into his New York City office, on Madison Avenue, fresh from a week of motorcycling through the Tuscan countryside. It was absolutely spectacular, he said. Ill tell you, the one thought that just kept going through my head all week long was, Im seventy-five years old. Im riding faster and better than I ever have in my life. He wore his usual outr uniform of pressed black jeans and black T-shirt, and was his typical jovial and provocative self. He was in town ostensibly to promote his new book, Am I Being Too Subtle? , a chatty memoir that is an homage both to his parentsJews who escaped Poland in 1939and to his own entrepreneurialism, which has helped him to accumulate a fortune estimated by Forbes to be five billion dollars.
Zell attributes his wealth to a prescription articulated by any number of successful business people: zigging when everyone else is zagging. Its a replicable formula, he says, and he has little patience for people who complain that it was somehow easier in the good old days, or that the moment for such opportunities has passed. (His earliest successes came from investing in real-estate assets that others shunned.) My message is, anybody can do it, he explained. Theyve got to be focussed. Theyve got to be driven. Theyve got to have a tin ear to conventional wisdom. Theyve got to think outside of the box. He refuses to listen when hes told he cant do something. I spent my whole life listening to people explain to me that I dont get it, he says. I look at the Forbes 400 list, and if I eliminate the people who inherited the money, everybody else went left when conventional wisdom said to go right. How did I do what I did? By not listening to anybody else.
It was this singular thinking, in part, that led to Zells biggest financial miscalculation: the December, 2007, acquisition of the Tribune Company, for $8.2 billion. At that time, Tribune was a venerable but troubled collection of newspapers, including the Chicago Tribune , the Los Angeles Times , and Newsday ; the superstation WGN America; the Food Network; twenty-three local and regional television stations; and the Chicago Cubs. (He quickly sold off Newsday and the Cubs.) He knew that the newspaper industry was struggling and in serious disarray. Thats why the deal he structured to buy the company was classic Zell: awfully clever, perhaps too clever. He borrowed billions of dollars ($11.5 billion, to be precise, bringing the total amount of debt on the company to fourteen billion dollars) and risked just enough of his own money, through Equity Group Investments, his investment firmthree hundred and fifteen million dollars, about six per cent of his net worthso that he could lose it without feeling too much pain.
Zell took the company private, alongside the Tribunes employees, through an employee-stock-ownership plan, or ESOP , which resulted in both tax benefits and the employees becoming his equity partners. He promised them that if the deal succeeded, they would get rich (and Zell would get richer). After the deal closed, he says he went around the company and met every person who worked for Tribune. I looked up each one of them and I said, Guys, if this doesn't work, its not going to change my lifestyle. But if this does work, its going to change yours. So climb onboard.
He also insulted them. He referred to Washington bureau reporters as overhead , and his suggestions to put ads on the front pages of the newspapers also offended them. In Zells telling, the employees were simply not wise enough to follow his lead. Im talking about survival, and theyre talking about journalistic arrogance, he said. I rest my case.
Ann Marie Lipinski, who resigned as the Chicago Tribunes editor in 2008, after sweeping staff cutbacks were carried out, flatly dismissed Zells version of events. Im sure thats a comforting narrative for him, but its rubbish, Lipinski, who is now the curator of the Neiman Foundation for Journalism at Harvard, wrote in an e-mail. The idea that employees opposing innovative ad placement were what brought the company to its knees demonstrates some real revisionist history.
Zell made other mistakes. Randy Michaels, the former radio executive he chose to run the Tribunes media properties (Michaels ran Jacor, a successful radio company that Zell bought out of bankruptcy in 1993), set a frat-house tone, and, as David Carr wrote in the Times , his and his executives use of sexual innuendo, poisonous workplace banter and profane invective shocked and offended people throughout the company. He also underestimated how quickly the companys revenues were declining, and within a year, the company had filed for bankruptcy, undone by a toxic combination of too much debt, plunging ad revenue, a general disruption confronting print media, and, to a lesser extent, the Great Recession. Needless to say, Tribune employees did not get rich.
Some blame Zell for being the architect of a leveraged buyout comprised of roughly ninety-eight per cent debt and two per cent equity. A virtually no-money-down L.B.O., said David Rosner, an attorney for a Tribune creditor, at a December, 2009, bankruptcy court hearing. In April of 2007, Tribune agreed to undertakeand the funding banks and, now, the hedge funds as successors, they agreedthey funded this massive amount of debt to permit Mr. Zell to acquire control of Tribune. That is the L.B.O. that drove this company into bankruptcy. Zell said, of the Tribune experience, I made a bet. I thought the bet was reasonable. I underwrote it appropriately. I was wrong. He lost his entire investment.
Though the fate of the Tribune newspapers got the most attention during the Zell years, it was the other properities, especially the TV stations, that interested him as a businessman, as Connie Bruck wrote in the magazine , in 2007. In part because of the failure of Zells leadership at Tribune and the debt he piled on it, those stations will now likely be used to form a conservative nationwide television rival to Fox News.
After emerging from bankruptcy after four years, and owned by its creditors, Tribune split itself into two piecesthe absurdly named Tronc, short for Tribune Online Content, its publicly traded newspaper groupand Tribune Media, its growing collection of local television stations. In May, Sinclair Broadcasting, which already owns a hundred and seventy-three television stations around the country, agreed to buy Tribune Media, with its forty-two stations, for $3.9 billion. Regulators are still evaluating the deal, but it now appears it will be completed. Sinclair has a reputation for its conservative bent in many markets and recently hired as its chief political analyst Boris Epshteyn, who served as an often contentious spokesman for Trumps Presidential campaign and then briefly as a White House adviser. (In his new gig, Ephsteyn recently criticized CNN, saying that it "along with other cable news networks, is struggling to stick to the facts and to be impartial in covering politics in general and this president specifically.)
As a bottom-line-oriented dealmaker, Zell is indifferent to the fate of the Tribunes television stations. It's all predictable because effectively, they no longer had scale and they no longer had an owner, he said. Then, it becomes a financial transaction. But by this point in our conversation, he had had enough talk of the Tribune deal.
Unlike many other Wall Street types, hes not particularly worried about Donald Trump, though he is hardly a fan. Zell did not give money to Trump during the Presidential campaign (he declined to say whom he supported or voted for) but said that he finds Trump to be far preferable to Hillary Clinton.
He repeated what has become almost a clich: that the lites on the coasts completely missed Trumps appeal. I live in the Midwest, said Zell, whose primary home is in Chicago. You do not understand how angry the people in the middle of the country were. Angry is the best description. That may be an understatement. Their anger was directed at Washington politicians and regulators who tell people what they can and cant do. When youre a farmer, or youre a landowner, and you got a puddle on your ground, and last week it was a puddle and now it's navigable waters, thats pretty serious shit, he said. I think thats the major problem of the Democratic Party, is exactly that stretch.
Zell said that Trumps Electoral College victory was about the people in the heartland sending a powerful message: We count. Youve been running this country for the benefit of urban lites. (He concedes that he, too, is an urban lite, but he also appreciates the wisdom of the message.) He said he thinks the East Coast and West Coast liberals are still in denial. They cant believe he got elected, he said. They cant believe what he does. Zell can. I dont think Trump is the disaster that the New Yorkers would like to portray him as, he said. But hes given up watching CNN because of what he sees as its anti-Trump bias. I dont like listening to Fox, either, he said, because its so biased.
The sale of the Tribune television stations to Sinclair wont make Zells dilemma about where to get his unbiased news any easier. And, in fact, it may exacerbate the growing schism between progressives and conservatives, further hardening already stark divisions. Thats a problem that Zell the businessman may choose to be matter-of-fact about, but not one that Zell, the son of clever and lucky immigrants, can afford to ignore.
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