December 31, 2020

Hedge fund Alden Global Capital has submitted a bid to acquire Tribune Publishing according to a filing Thursday with the Securities and Exchange Commission. The deal is valued at $520 million.

If successful, Alden would gain control of the Chicago Tribune, the New York Daily News, the Orlando Sentinel and the Sun-Sentinel of Fort Lauderdale among several large metros.

The nonbinding offer, first reported by The Wall Street Journal, is for $14.25 a share, a modest 11% premium over Tribune’s closing stock price Wednesday. The stock shot up to $14 a share soon after the market opened Thursday, suggesting Wall Street expects the deal to go through.

Alden already owns 32% of Tribune Publishing, and Alden’s founder, Randall Smith, has a seat on the board. The offer was submitted to Tribune Publishing’s board Dec. 14, and Alden said that given its familiarity with the company, it hoped to move to a final agreement within two to three weeks.

The sale would require the approval of two-thirds of Tribune’s other shareholders and a special committee of independent directors. Dr. Patrick Soon-Shiong owns a little less than 25% of the company, as part of his acquisition of the Los Angeles Times for $500 million in June 2018. His willingness to sell now would be key to completing the deal.

Since the bid is nonbinding, Alden could withdraw or modify it at any time.

The hedge fund, notorious for draconian job cuts and other expense cuts, already owns dozens of newspapers through its MediaNews Group, including The Denver Post, The Orange County Register and clusters of dailies in the San Francisco and Los Angeles metro areas.

In its offer letter, Alden says that another investor, Maryland businessman Stewart Bainum Jr., has expressed an interest in buying “certain assets” of Tribune as part of a deal. That possibility is worth exploring, Alden says. Bainum is chairman of Choice Hotels International, based in Rockville, Maryland.

I have been unable to reach Bainum for comment, but a reasonable guess is that his target is The Baltimore Sun Media Group, which includes several suburban papers and the Capital Gazette in Annapolis. Various individuals and foundations have been seeking to bring the Sun back to local ownership for more than a decade. Up until now, the company has rebuffed those efforts.

Bainum, a Democrat, served eight years in Maryland’s legislature. He and his wife agreed in 2018 to The Giving Pledge, in which wealthy families agree to give away a majority of their assets.

Alden’s pursuit of Tribune has come in gradual steps. It gained most of its stake by buying former chairman Michael Ferro’s shares in November 2019.

It appears that Alden, though a minority shareholder, has been exerting steady pressure on the company since to pare expenses while selling off real estate and other assets. Earlier this month the company sold its profitable BestReviews subsidiary to Nexstar for $160 million.

In February, Tribune replaced CEO Timothy Knight with chief financial officer Terry Jimenez and made other high-level executive changes in the management of the flagship Chicago Tribune.

Alden agreed to a “standstill” agreement, most recently extended through June 2021. That precludes increasing its stake by buying blocks of shares on the open market — but apparently not a bid for the whole company if the board approves a takeover.

In its offer letter, Alden says a combination with Tribune, and taking the company private, “would be able to unlock significant strategic and financial value,” likely by combining corporate functions and squeezing out other costs.

The MediaNews Group’s deep cuts to the newsroom of The Denver Post prompted protests and resignations in spring 2018, along with a special opinion section deploring journalism declines and absentee ownership.

The NewsGuild has been a fierce critic of Alden. The union’s president, Jon Schleuss, commented Thursday, “Alden has made a fortune by destroying local news. They fashion short-term business plans that cut newsrooms to the bone — destroying the watchdogs of our democracy. Our thousands of members will continue to fight hedge fund ownership of local news.”

Chairman Smith and Alden have a longstanding interest in acquiring as much of the local newspaper industry as they can. (I first profiled Smith in July 2011). The company had previously made unsuccessful takeover offers for the Gannett and McClatchy chains.

Tribune differs from those companies, both of which have changed hands in the last two years — it is nearly debt-free thanks to the proceeds of the $500 million sale of the Los Angeles Times to Soon-Shiong.

Alden said that it has cash available for the full purchase price, so the offer is not contingent on a lender’s approval.

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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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