That might explain why the flamboyant Chicago real estate magnate believes he can transform Tribune Co. at a time when newspapers and local television stations are under an unprecedented state of siege from the Internet.
The offer that was announced Monday morning by Tribune's board is a high-stakes test of his theories about entrepreneurship. He will load the company with an unprecedented level of debt and use employee funds in the form of an employee stock ownership plan to help him finance the deal.
This transaction, which would return Tribune to private ownership, also would make the company one of the most heavily indebted enterprises in the media industry at a time of falling readership and declining advertising revenues.
Those close to Zell say his solutions likely will include making better use of the Internet and taking advantage of tax breaks and Tribune's real estate holdings. They say he intends to give current management a chance to extract value from an industry that has fallen out of favor with investors but one that Zell thinks can still thrive in the Internet age.
Zell is said to acknowledge he doesn't yet have all the answers, but it speaks to his confidence as an investor that he believes he can find them.
The fact that Tribune's auction dragged on for nine months with a dearth of serious bidders speaks volumes about how the rest of the world views the outlook for traditional media properties in an increasingly digital world. Zell hedged his own bet by limiting his personal investment in the deal to $315 million and relying on the ESOP as the backbone of his $8.2 billion purchase price. Tribune's $5 billion in existing debt will remain on the books.
Even some industry rivals are dumbfounded by what Zell has planned.
"The amount of debt Tribune is going to have blows my mind," said one of them, noting that he's expecting three years of cash flow declines as once-loyal advertisers rush to get online. "It seems very dangerous to me."
Many observers have speculated that Zell's only exit from the danger zone will be to continue the cost-cutting, job-slashing and asset-shuffling that has caused so much angst in the newspaper industry. Critics note that his recent operating results as a manager have been less than encouraging: Although he cleared $1.1 billion when he sold his Equity Office Properties Trust to Blackstone Group in February, that company's returns underperformed its peers' over the past decade.
But Zell has said repeatedly he has no intention of breaking up Tribune. He may find it tempting to ease the debt burden by selling a prize like the Chicago Cubs, but those who know him believe a strategy that depends on massive cost-cutting or asset sales isn't Zell's style. The 65-year-old Highland Park native, they say, earned his $4.5 billion fortune not by tearing things down but by building them up.
"His job is looking over the horizon," said a person who used to work with Zell. "You won't necessarily find [what he sees] in the annual report right now."
Short, balding and pugnacious, Zell is among Chicago's most iconoclastic business figures. A born outsider, he rides motorcycles, parties hard, talks like a truck driver and may be keeping Marlboro in business.
But no one would care about any of that if he weren't so good at buying low and selling high. Though his self-imposed nickname, The Grave Dancer, implies death and destruction, Zell's fortune is built on finding a pulse where others don't. His talent, people say, is exploiting assets in ways most never would have thought of.
In the case of Tribune, Zell has already shown off his financial agility. At least seven private-equity firms kicked the tires at Tribune but couldn't make a deal work for more than $30 a share. The board concluded that the four other deals that did develop were too tentative or too debt heavy, including two versions from Los Angeles billionaires Ronald Burkle and Eli Broad.
But then Zell emerged in early February with his offer. He made it work by building his proposal around an ESOP, which should slash Tribune's tax bill and boost the company's cash flow enough to make a much larger debt load manageable.
As creative as the deal is, however, adding more than $7 billion in new debt to Tribune's balance sheet puts the company under enormous pressure to perform. That may be risky, but according to Zell's worldview, it may also force a conservative, bureaucratic company that is stuck in the past to dig deeper to find some innovative solutions to help it start embracing the future.
While Zell has pledged that he has no intention of inserting himself in the editorial process at Tribune's media outlets, he will, however, play an active role on the business side. Executives running other companies he has invested in say Zell doesn't micromanage or presume to know more than his managers do about operations. But by constantly asking questions and testing assumptions, he tries to guide them toward more-effective strategies.