June 17, 2020

We are just two weeks away from the trigger date for the majority of Tribune Publishing to be put into play. The future of major regional papers — including the Chicago Tribune and The Baltimore Sun — hangs in the balance.

As has been reported widely, Alden Global Capital owns 32% of Tribune Publishing stock. Alden gained two seats on an eight-person board in November and appears to have been exerting its influence in a series of pay and job cuts and several executive departures.

Under a standstill agreement, Alden cannot increase its stock holdings until after June 30. Then the door opens to Alden’s taking full control or forcing a sale.

What has received less attention is that one other person could determine the outcome. Dr. Patrick Soon-Shiong, who bought the Los Angeles Times from Tribune for $500 million in February 2018, also retains just under 25% of Tribune stock. He too is under a standstill agreement not to do anything with the stock before the end of the month.

Should Soon-Shiong cast his lot with Alden, 32 plus 25 equals control of the company.

Soon-Shiong has not commented on Tribune Publishing ownership. Through a spokeswoman, he declined to be interviewed by me. Soon-Shiong is a bioscientist and entrepreneur whose fortune comes mainly from the invention of a cancer drug. The spokeswoman said that he has been extremely busy lately working on the COVID-19 challenge.

To me, that makes it all the more unlikely that Soon-Shiong would want to buy Tribune Publishing or have a hand in its management. Besides the $500 million purchase price, he has tens of millions invested in rebuilding and expanding the Times.

That is a full plate of publishing. Given Alden’s track record of slashing staff and disinvestment in the papers it already controls, it is conceivable Soon-Shiong might look favorably on a white knight takeover alternative if one emerges. But these properties are far away from his Los Angeles home.

Keep in mind that Alden made a bid for Gannett last year, driving the nation’s largest chain into being purchased instead by GateHouse parent New Media Investment. And Alden has just increased its holding of Lee Enterprises, which owns newspapers in 25 states, to 7.1%.

Alden potentially cashes in, therefore, if someone else buys.

In Sarah Ellison’s deep dive Washington Post profile of Alden managing director Heath Freeman earlier this month, Freeman was vague about his business plans but hinted that he sees more consolidation cooking for the industry with Alden in a leading role.

An alternative for Tribune Publishing would be to sell off its papers separately. A new investor, former publishing executive Mason Slaine, has taken a 7.9% stake. At the company’s annual meeting May 21, he advocated the selloff of individual papers.

In Baltimore, a pair of well-heeled local foundations with encouragement from the NewsGuild has declared an interest in buying The Baltimore Sun and has gotten at least as far as a virtual meeting with Tribune management.

A host of prominent Maryland residents have signed petitions in support of the sale. This week several dozen Sun alums wrote letters asking for local control, including Sarah Koenig of the wildly successful Serial podcast.

As reported by both The New Yorker and The New York Times, a pair of Chicago Tribune investigative reporters went knocking on doors around town early this year trying to find an individual or group that would buy their paper out of the company.

My experience in 15 years of covering the industry is that single papers are occasionally sold by chains — but typically at a substantial premium of 30 to 100% of market valuation.

That local buyers could be found for most or many of the Tribune’s nine markets seems unlikely — but not impossible.

Another financial feature of a potential Tribune Publishing acquisition or breakup is that the company — unlike other publicly traded chains like McClatchy or Lee — has virtually no debt. Tribune was not heavily leveraged with borrowing in the first place, and the $500 million from the sale of the Los Angeles Times made it cash-rich.

There seems to be no likelihood that a bankruptcy reorganization, clearing the way for a restart, will be part of an upcoming scenario.

Tribune’s particular business problem has been that its many changes in ownership, management and strategy have worked against the sustained initiatives needed to engineer a gradual print to print plus digital to digital transformation.

Tribune’s journalism, though newsrooms have been cut and cut again, remains stronger than at many other chain-owned properties, certainly any of Alden’s. Its outlets are in mid-size to big metro areas and so not as subject to a starvation ration of local news so prevalent elsewhere.

Alden has been indifferent to staff morale as it has expanded its holdings and cut expenses. But at heavily unionized Tribune Publishing, with NewsGuild locals and others in a mutinous mood, that could be much more of a negative.

None of this, unfortunately, ensures a happy ending, or any ending at all to Tribune’s long-running tale of ownership adventures. But, for sure, a next chapter is coming soon.

Rick Edmonds is Poynter’s media business analyst. He can be reached at redmonds@poynter.org.

Correction: Alden owns a 7.1% stake in Lee Enterprises, not 13%. 

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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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