February 22, 2021

So let me see if I have this straight.

Friday afternoon, as markets back east were getting ready to close, The Wall Street Journal reported a shocker — Dr. Patrick Soon-Shiong is exploring the possibility of selling the Los Angeles Times and sister paper The San Diego Union-Tribune. He bought the pair not quite three years ago for $500 million.

Pixels were barely settling when Soon-Shiong shot back. No, he doesn’t plan to sell.

The Journal’s quick rejoinder was the standard “we stand by our story.”

Which side had it right?

I will put my money on the Journal story holding up. Here’s why.

Without going deep into parsing Soon-Shiong’s statement-by-tweet, there seems to be some wiggle room. For right now, he is continuing to pursue a complex expansion and refocus plan, set back by punishing, bigger than expected losses. Those, in turn, were made even worse by the pandemic.

Soon-Shiong is in, you could say, at least until somewhere down the road when he might choose to get out. Say, if an attractive offer comes along and passes all the regulatory and financing hurdles.

Typically, “exploring options” is code meaning a seller wants out, and a fair bid price will do it. However, at least some explorations end with no sale — for instance if the seller thinks that the offer price is too low and that he could get a better one by waiting.

The Journal’s experienced media deals reporter, Lukas Alpert, is tops — with deep sourcing in the investment community. He and his editors would not go with such an emphatic news story unless they had solid reason to be confident.

Check out this apparently throwaway paragraph:

Mr. Soon-Shiong has been heavily focused on efforts by his immunotherapy company to develop a Covid-19 vaccine and has had little time to devote to the Times, people familiar with the matter said. “Covid really brought him back to the lab,” said one of the people.

C’mon, would the Journal even think of publishing that without a rock-solid inside source? Second-hand or third-hand chatter on the street would not cut it.

These may hardly be hot times for legacy newspaper properties, but possible buyers leap to mind.

If Alden Global Capital combined the Times with its Orange County Register and Southern California News Group, kaboom, it has a 16 million population market in the biggest U.S. state.

That is some kind of franchise.

Could such a combination get past antitrust regulators, though? That is not a sure thing by any means. Even if the Justice Department took a pass, private interests might sue, potentially tying up completion of any deal for months, even years.

A dark horse to watch is Hearst — a huge, privately-held company with a substantial entertainment industry presence and strong newspaper division. Not to mention it owns the San Francisco Chronicle, which would pair nicely with Los Angeles’ dominant paper.

There could be yet more deal variations possible — for example somehow peeling off the Union-Tribune as Alden did with The Baltimore Sun last week when its bid to buy Tribune Publishing was accepted.

One more inside-baseball reference in the Journal story rings true. Soon-Shiong, the Journal says, believes the papers “would be better served if they were part of a larger media group.”

That is a great reason to sell. Strategic planning exercises likely show the company will need a lot more capital and maybe new leadership as well. The brutal expenses of operating as a loner in a chain world probably mean someone else is better to take that task on than Soon-Shiong.

That was exactly the rationale for the Graham family selling The Washington Post to Jeff Bezos. They had gone as far as they could.

Consider too that should Soon-Shiong vote to sell his big stake in Tribune Publishing in the Alden deal and unload one or both of the California papers, that will generate a ton of new money to invest in searching for the next big thing in biotech.

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
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