For all of Sam Zell's reputation as a steely, clear-eyed dealmaker, two misconceptions clouded his vision in the run-up to taking Tribune Co. private in December 2007.
Zell had told anyone who would listen as far back as 2006 that he didn't believe there would be anything resembling a recession until the first quarter of 2009.
The billionaire Chicago real estate magnate also maintained the media industry was too complacent. Whether out of arrogance or ignorance, it failed to see and address the dangers ahead and innovate around them, he asserted.
Zell initially characterized his bet on the parent of the Chicago Tribune, WGN-Ch. 9, Los Angeles Times and other media properties as a long-term investment. Instead, it ended Monday with the company's exit from bankruptcy after more than four years and Zell's exit as its chairman after more than five.
The Great Recession, as it turned out, began the same month Zell assumed control of Tribune Co. Despite whatever game plan Zell and his management team may have had to rouse the company, things deteriorated so badly so fast that they found themselves seeking Chapter 11 protection within a year.
Many pricey billable hours later, that shield — or cloud — has at long last lifted. For those of us in the center of the storm, trying to make sense of the past few years is a bit like sorting through a dream in the light of day. Some of it makes sense. Some of it, perhaps, never did.
A strong case can be made that much of what undid Tribune Co. under Zell might well have undone the company under its previous regime as well. The costs and unrealized benefits of its $8 billion acquisition of Times Mirror Co. in 2000, which brought the Los Angeles Times and its sister media properties but few of the hoped-for synergies to Tribune Co., was just one set of powder kegs left behind by the old guard.
For that matter, the only reason the company was in play for Zell to pick up was that the heirs of the once-mighty Times Mirror empire, welcomed into the Tribune Co. boardroom with the deal, sought to cash out.
Zell and his management team, however, did little to deliver on promises of unlocking value through a more intelligent corporate structure and other strategies. Combined with the huge debt their acquisition piled on, the company's slide only accelerated.
Whatever ambitions Team Zell had soon became secondary to simply reacting to an industrywide revenue slump and the weakening economy Zell failed to adequately anticipate. Costs were slashed and strata of corporate bureaucracy eliminated. But no game breaker for broadcasting, print or digital ever materialized.
Zell likely will be remembered by many largely as a caricature, the plain-spoken, pugnacious, gravel-voiced maverick with an affinity for jeans, open-collared shirts and salty language. But, in reality, it's possible he's just a wild-eyed optimist. Plenty of people saw eroding beachfront and storm clouds on the economic horizon well before Zell completed the Tribune Co. deal.
More than two weeks before the deal was finalized, in mid-March 2007, Tribune Co. had a market value of around $7.3 billion and already had about $5 billion in debt, no small burden in and of itself. I reported at the time that Zell's complex $8.2 billion deal proposal raised serious "concern about the debt load" of roughly $13 billion "despite being buoyed by the tax benefits of an employee stock ownership plan" plus Zell's own investment.
Yet Zell pushed on, undaunted and undiscouraged. Emblematic of the era of risky lending that had precipitated the nation's financial crisis and was winding down, he overcame whatever resistance there was to what he already would dub "the transaction from hell" on the day he assumed control.
"I was too optimistic in terms of the newspapers' ability to preserve (their) position," Zell would admit to Bloomberg Television in April 2009.
And whenever Zell was asked how long he thought it would take Tribune Co. to emerge from bankruptcy, he always seemed to say it was just around the corner. People stopped asking at some point.
Zell's positivism extended to Randy Michaels, who had made Zell a lot of money in the radio business years earlier and in whose hands Zell placed Tribune Co. He argued that Michaels' raucous style fostered creativity.
But Michaels' run as chief executive came to an end as he and his executive coterie of radio cohorts were excoriated in 2010 for nurturing what The New York Times branded a "frat house" atmosphere among Tribune Co.'s leadership ranks.
Despite concern that a change in leadership might further slow the fractious, stop-and-start negotiations with bankruptcy creditors, the company's once-supportive board questioned whether Michaels had become too great a liability.
Michaels resigned in the fall of 2010. But on CNBC just one month later, Zell remained supportive of his former CEO. "Despite all of the publicity and The New York Times articles, etc., the company is in dramatically better shape today than it was when we bought it in '07," he said.
Tribune Co. is exiting bankruptcy with a value pegged at around $4.5 billion, after cash distributions and new financing, far less than what it was worth in '07. And the mind races back to an appearance by Zell two months before he took over Tribune Co., when he was a featured speaker at the Inland Press Association's annual meeting.