ESOP, Zell Take Over at Tribune

Eight months after announcing the proposed transaction, Sam Zell has assumed control of the Tribune Company. An ESOP will own 100% of Tribune's shares and Zell will hold warrants convertible into a 40% stake in the company. In a surprise move (and one well-received among many employee groups), CEO Dennis FitzSimmons stepped down, with Zell replacing him. Zell said his first order of business would be to decentralize decision-making, providing much more autonomy to individual business units. He also told reporters that employees would be "shocked at the candor" with which he would disclose detailed financial information about the company and its individual units.

With 21,000 employees, the Tribune Company will be the fifth-largest majority employee ownership company. Because it is such a high-profile operation, it will become the kind of flagship company that United Airlines was for its years as an ESOP. When the Tribune transaction was first announced, many nationally-known pundits said they expected to see private equity firms flock to the model of 100% ESOPs with substantial stock warrants for investors. In fact, however, no private equity firm has yet to replicate that model in any large company.