Oct. 23 (Bloomberg) -- U.S. buyout firms Apollo Management LP and Carlyle Group are exploring separate takeover bids for Tribune Co., publisher of the Chicago Tribune and Los Angeles Times, people familiar with the matter said.

Apollo, Madison Dearborn Partners LLC and Providence Equity Partners Inc. are considering a joint offer, while Carlyle so far is working alone, said the people, who asked not to be identified because the deliberations are private. Texas Pacific Group and Thomas H. Lee Partners LP also are studying a bid for Tribune, which has a market value of $8.1 billion, the Wall Street Journal reported earlier today.

Tribune, based in Chicago, last month said it may sell all or some of its assets, which also include 25 television stations and the Chicago Cubs of Major League Baseball. The Chandler family, the company's largest shareholder, pressed for the move in June after a 19 percent decline in the company's shares in the previous five years.

``There is a possibility that private equity can do things companies in the public domain can't, such as cut costs,'' said Michael Kupinski, an A.G. Edwards Inc. analyst in St. Louis, who has a ``buy'' recommendation on Tribune shares. The company may fetch about $40 a share, he said.

Officials for New York-based Apollo, Chicago-based Madison Dearborn, Fort Worth, Texas-based Texas Pacific, Washington-based Carlyle and Providence Equity of Providence, Rhode Island declined to comment. Tribune spokesman Gary Weitman and Matthew Benson, a spokesman for Boston-based Thomas H. Lee, didn't return calls seeking comment.

Default Risk Rises

Tribune shares rose 87 cents, or 2.7 percent, to $33.18 at 4 p.m. in New York Stock Exchange composite trading. They're up 11 percent since the start of June, when speculation first circulated that Chief Executive Officer Dennis FitzSimons might be forced to break up the company, compared with a gain of 9.3 percent by the Standard & Poor's 500 Index.

The perceived risk of owning Tribune's bonds jumped today, according to traders who bet on the creditworthiness of companies in the credit-default swap market. Leveraged buyout firms buy companies using little of their own money and borrow to pay about two-thirds of purchase price, causing the vale of the target's existing debt to depreciate.

The price of credit-default swaps based on $10 million of Chicago-based Tribune bonds rose 15 percent to $190,000, the highest since at least early 2003, according to data compiled by Credit Derivatives Research LLC in Walnut Creek, California. The price was $165,000 last week.

Newspapers Struggle

``A buyout is the scenario that gives credit investors the most worry because it is the one under which the most leverage could be imposed,'' said Jake Newman, a media analyst with New York-based CreditSights Inc.

Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. An increase indicates deterioration in the perception of credit quality; a decline suggests improvement.

Newspapers have been hurt by the loss of advertisers and readers to the Internet and cable television. Knight-Ridder Inc. sold itself to McClatchy Co. in June for $4.1 billion to mollify investors unhappy with a decline in the company's stock.

A special committee of the Tribune board is being advised by Morgan Stanley. Merrill Lynch & Co. and Citigroup Inc. are advising the company, the second-largest U.S. newspaper publisher. Goldman Sachs Group Inc. is advising the Chandler family trusts, heirs of the Los Angeles Times.

Buyout Boom

Andrea Rachman, a spokeswoman for Goldman, declined to comment, as did Merrill spokeswoman Terez Hanhan and Citigroup spokeswoman Andrea Hurst. Morgan Stanley spokesman Mark Lake was traveling and not available for comment. All the firms are based in New York.

Buyout firms, benefiting from access to low-rate financing, have announced more than $465 billion of purchases this year. Private-equity firms use a combination of equity and debt for takeovers and seek to cuts cost and improve profits to bolster the long-term prospects of their investments before selling them after three to five years.

To contact the reporter on this story: Brett Cole in New York at coleb@bloomberg.net

Last Updated: October 23, 2006 17:04 EDT