March 29 (Bloomberg) -- Sam Zell's $8 billion takeover bid for Tribune Co. may signal that share prices of newspaper publishers are too high.

At $33 a share, Zell's buyout offer is equal to 9.2 times Tribune's 2006 earnings before interest, taxes, depreciation and amortization, said Alexia Quadrani, an industry analyst at Bear Stearns Cos. That's lower than the average 9.8 times earnings that competitors' stocks are fetching, Quadrani said.

``The acquisition premium has shrunk to where it's almost non-existent,'' said New York-based Quadrani, who has a ``peer perform'' rating on the stock. ``That suggests that the price of newspaper stocks is at their peak, which is what you've seen with Tribune.''

Tribune, publisher of the Los Angeles Times and Chicago Tribune, will probably accept Zell's offer by the end of the week, meeting a self-imposed deadline, people with knowledge of the deliberations said this week. Interest from other buyers waned during the auction, now in its sixth month, and Tribune's shares dropped 8.4 percent.

The offer doesn't ``bode well for industry valuations going forward,'' said John Janedis, a newspaper analyst at Wachovia Capital Markets in New York. Janedis, who rates Tribune shares ``market perform,'' said he had expected a sale price of about $35 a share.

Investors Disappointed

Shares of Chicago-based Tribune rose 40 cents to $31.53 at 4:04 p.m. in New York Stock Exchange composite trading. The Standard & Poor's 500 Publishing & Printing Index had fallen 5.9 percent this year.

McLean, Virginia-based Gannett Co., the largest U.S. newspaper company, has declined 7.1 percent this year and Dow Jones & Co. has dropped 9.9 percent.

Gannett is trading at 8 times its 2006 Ebitda, while New York-based Dow Jones, publisher of the Wall Street Journal, is trading at 12.6 times, Quadrani said. New York Times Co. is trading at 9.4 times, she said.

Newspaper stocks began to slide after McClatchy Co. offered to buy Knight Ridder Inc. for 9.6 times earnings. That $6.14 billion sale disappointed investors, Craig Huber, a New York- based analyst at Lehman Brothers, wrote in a note to clients yesterday.

Newspaper companies typically sold for 11.5 times to 13.5 times earnings in 1995 to 2005, Huber said.

Negative Catalyst

Investors had ``held out the hope that Knight Ridder would be taken out at a significant premium and would serve as a catalyst for the group; the opposite ended up happening,'' Huber said. He has an ``underweight'' rating on the stock. ``We think the same thing is happening with the current Tribune situation and would be very careful owning any stocks in the newspaper sector.''

Valuations on Tribune had risen as high as $55 a share when the company put itself up for sale in September, Huber said.

Zell, a 65-year-old real estate billionaire, entered the bidding in February as interest in Tribune waned.

Tribune, also owner of 23 television stations and 11 newspapers, said this month that newspaper advertising fell 5.1 percent in February to $233 million, led by a 13 percent drop in classifieds.

Ad sales at the four largest U.S. newspaper publishers, including New York Times, Gannett and McClatchy, fell an average 5 percent last month from February 2006.

``Ad revenue trends over the past several months are clearly having an impact on the bidding process,'' Janedis wrote.

To contact the reporter on this story: Leon Lazaroff in New York at llazaroff@bloomberg.net

Last Updated: March 29, 2007 16:28 EDT