May 9, 2016

Tribune Publishing upped the ante Monday in its attempt to stymie a takeover by Gannett.

The company disclosed that its board has adopted a “limited duration Shareholder Rights Plan.” Under the plan, Tribune’s shareholders can double their holdings in the event that another party — in this case Gannett — acquires more than 20 percent of the company.

In common corporate parlance, that’s a “poison pill.”

The idea was hatched by a prominent New York attorney, Martin Lipton, and a way to essentially protect corporate insiders from shareholder activism.

“It’s like a ticking time bomb that will detonate if a potential buyer for the company gets too close, destroying the entire company’s capital structure,” said Nell Minow, a Washington-based corporate governance expert. “They are not intended to ever actually be used; they are there to scare someone away.”

For sure, as she noted, the ploy is not always cynical and dubious. It can be utilized to give a corporate board breathing room to ensure it generates the highest bid for the company.

But there are different types, and the likes of Minow tend to prefer only what’s known as a “chewable pill” — namely one that is redeemed by a shareholder vote to assure management doesn’t use it simply to protect itself from buyers who might well do better for shareholder.

And to say it is “temporary,” as Tribune does in its Monday announcement, doesn’t necessarily mean much since a company could always adopt the same gambit anytime it desires. Netflix, for example, recently resorted to a “poison pill” to fend off investor Carl Icahn, but it could exercise that option if another corporate raider came calling.

Gannett responded unfavorably to Tribune’s proposal Monday morning, calling it “another roadblock to prevent its stockholders from realizing compelling, immediate and certain cash value for their investment.”

The decision to implement a poison pill is yet another demonstration that Tribune’s Board and management team are not listening to its stockholders. Gannett continues to believe in the strength of its $12.25 per share all-cash proposal and its ability to advance Tribune’s publications and journalism as part of Gannett’s USA TODAY Network.

Today’s maneuver is the latest in a battle that began late last month, when Gannett went public with an $815 million bid to buy the publisher of the Chicago Tribune, the Los Angeles Times and nine other major dailies.

Early talks were fractious, with Gannett and Tribune exchanging heated words in public before the Chicago-based publisher rejected the offer.

Since then, Tribune’s No. 2 shareholder, Oaktree capital, urged the company to negotiate with Gannett, but primary shareholder Michael Ferro has been publicly committed to embark upon his own moneymaking strategy. It includes a “content monetization engine” and remaking the Los Angeles Times into a global chronicle of entertainment.

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New York City native, graduate of Collegiate School, Amherst College and Roosevelt University. Married to Cornelia Grumman, dad of Blair and Eliot. National columnist, U.S.…
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