A weeks-long dispute between Gannett and Tribune Publishing for control of the company has landed in court.
Last night, Tribune Publishing shareholder Capital Structures Realty filed a complaint in a Delaware court accusing company executives, including Chairman Michael Ferro, of neglecting their fiduciary duties in the wake of a takeover bid launched by Gannett.
The lawsuit is the latest salvo in a tug-of-war for ownership of the company’s 11 major dailies, including the Los Angeles Times and the Chicago Tribune, which are among the most storied in America.
Specifically, the complaint seeks to undo a recent deal by company leadership to sell $70 million worth of stock to Nant Capital, the investment firm controlled by Dr. Patrick Soon-Shiong, which Capital Structures says was entered into “for improper reasons.”
The deal with Soon-Shiong, the complaint alleges, “was done for only one purpose, to entrench the Board.”
The Company was not looking to issue shares before Gannett’s purchase. In fact, if Oaktree Capital had been willing to sell its holdings, Tribune would not have sold any new stock to defendant Soon-Shiong. Instead, defendant Ferro was searching for a like-minded large stockholder to blunt the substantial momentum building behind Gannett’s offer and its campaign to urge stockholders to “withhold” their support for the existing Board members at the upcoming annual meeting.
A Tribune Publishing spokesperson told Poynter the company has “received a copy of the complaint and is reviewing it carefully.”
The stock sales to Merrick Media and Nant Capital were approved by the Board of Directors and will provide valuable growth capital to allow the company to execute on its new value-creating business plan.
The lawsuit was filed on the eve of Tribune Publishing’s annual shareholders meeting, where investors will withhold or cast votes for Tribune Publishing’s board of directors slate in a test of confidence of the company’s leadership.
Tribune Publishing has consistently maintained that it’s acting in the best interest of its shareholders, claiming decisions to spurn Gannett’s successive takeover bids were rooted in a belief that they undervalued the company. Ferro has expressed confidence in a turnaround strategy that he says will bolster Tribune’s prospects, which include a “content monetization engine” and turning the Los Angeles Times into a global publication chronicling entertainment.