January 6, 2021

This article was updated on Jan. 6 to include a statement from Alden Global Capital.

Less than a week after hedge fund Alden Global Capital offered to buy Tribune Publishing in a $520 million deal, the NewsGuild has signaled it will legally challenge the takeover.

In a letter to board chairman Philip Franklin released Tuesday, the union asked that the three of Tribune Publishing’s seven directors affiliated with Alden be removed.

The guild alleges that Randall Smith, one of the three and Alden’s founder, failed to meet Securities and Exchange Commission reporting requirements. It also charges that Alden “colluded” with another potential investor, Maryland businessman Stewart Bainum, to put together a bid and then delayed making it public.

An Alden spokesperson emailed Wednesday: “The union has its facts wrong and has reached several incorrect factual and legal conclusions. Most importantly, as our letter makes perfectly clear, our offer was made in conformance with legal and fiduciary requirements. And obviously the SPAC (a separate acquisition company related to Alden) has nothing to do with Tribune.”

The letter, from the Chicago Tribune guild chapter, is not a lawsuit or a formal SEC complaint but could pave the way for both later.

It’s one of several developments over the last several days in what promises to be a fast-moving takeover drama.

Tribune Publishing announced Friday that it was appointing a special committee of the three independent directors to evaluate the bid. At least in theory, that prevents the Alden directors from jamming through approval and waiving an earlier agreement not to buy more shares until the end of June. (Votes by a two-thirds majority of shareholders would also be needed for the deal to go through).

Tribune stock has risen this week to nearly $15 a share. That is more than the $14.25 Alden bid for the 68% of the company it does not already own.

The offer, announced Thursday, was only 11% higher than the stock’s closing price Wednesday, a very modest premium for an acquisition. The Wall Street Journal reported Friday that both another minority shareholder and a leading industry analyst considered the bid too low.

That suggests that Alden may need to up its offer to be successful. Or, less likely, that another “white knight” bidder could emerge now that the company is in play.

The guild’s objection turns on a part of Smith’s letter that says Bainum might be interested in acquiring certain unspecified assets of the company as part of the transaction. I speculated in a story last week that those assets most likely would be The Baltimore Sun and related Maryland papers. Bainum, chairman of Choice Hotels International based in Rockville, has not been available for comment.

If Bainum was onboard as part of the bid, the guild argues, Alden and Tribune should have disclosed so earlier than Dec. 31.

My own reading of the offer letter is that Bainum had earlier communicated preliminary interest to the board and was not yet part of a bid — but that could ultimately be up to regulators or a court to sort out.

Besides the flagship Chicago Tribune, Tribune Publishing owns metros in Orlando, South Florida, Norfolk, Baltimore, Allentown and Hartford, as well as the New York Daily News.

The guild is organized at all those except the Sun-Sentinel in Fort Lauderdale. Since Alden acquired its 32% stake in late 2019, local union chapters have been trying to identify potential local buyers.

At the Chicago Tribune, which could become the largest U.S. paper owned by a hedge fund, two investigative reporters began knocking on doors, hoping, without immediate success, to find someone or a consortium of wealthy individuals to come forward to purchase the paper.

Incoming guild chapter president Greg Pratt emailed me Thursday, “We continue to hope that someone in Chicago who’s civic-minded will step up and save the newspaper. In the meantime, we stand with the Chicago News Guild local in their call to oust the Alden-connected members of the Tribune Publishing board.”

In a press release, national NewsGuild president Jon Schleuss said, “The dealings outlined in Alden’s own filings about these proposed transactions show that Alden representatives who serve on the Tribune Publishing board have put their own interests ahead of shareholders, and they should be removed from the board. … Alden is treating Tribune shareholders with the same disrespect it has for its employees, the newspapers they own and the communities they serve.”

Alden already owns 60 dailies through its MediaNews Group. It has made deep cuts in their newsroom staffing and other operations and could be expected to do more of the same should it gain full control of Tribune Publishing.

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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…
Rick Edmonds

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