February 16, 2021

Update: The Chicago Tribune reported Tuesday evening that Tribune Publishing has “agreed to be acquired by Alden Global Capital in a deal valued at $630 million.” In addition, the Tribune and The Baltimore Sun reported that the Sun, along with a handful of other Baltimore-area weeklies and magazines, would be sold to a Baltimore nonprofit. The Tribune reported the deal “requires the approval of two-thirds of shareholders not affiliated with Alden and must pass regulatory scrutiny” and must also be approved by Soon-Shiong, as we reported here.

“Alden Global Capital’s offensive to acquire full control of Tribune Publishing advances by the day. The hedge fund, notorious for its cost-cutting, is now in active negotiations with a special committee of independent directors established by Tribune Publishing to consider Alden’s December offer to buy the company.

A deal in principle could be completed in the next few days, next week or next month.

It cannot happen, however, without the agreement of Dr. Patrick Soon-Shiong, owner of the Los Angeles Times. In essence, he has veto power.

Soon-Shiong, a typical billionaire owner who got into the game to acquire and revitalize his hometown paper, now also stands to determine the fate of the biggest and most important regional newspaper company remaining on the market.

He can choose simply to aim for the highest price — exerting his leverage to get a big increase over the $14.25 a share offered in Alden’s initial bid.

Or he could instead take into account preserving the journalism that Tribune Publishing outlets like the flagship Chicago Tribune, The Baltimore Sun and the New York Daily News and others do and do well.

An informed guess:

Soon-Shiong, a medical doctor who made his fortune as a biotech entrepreneur, has his hands full with the Los Angeles Times. He bought it and The San Diego Union-Tribune from Tribune Publishing in June 2018 for $500 million.

In the two-and-a-half years since, he has lost a lot more money than he had anticipated. Plenty of work, including finding a new editor, remains.

I would bet that getting out with a good return on his investment will be Soon-Shiong’s main or sole objective.

The math behind Soon-Shiong’s veto power

Here is a short explanation of how the rules for completing or rejecting the merger offer (set by the parties, not by law) have been written so as to give Soon-Shiong that outsized role. Three sources familiar with how such deals generally come together, and with this one in particular, confirmed my take in interviews:

  • Alden already owned a 32% stake in Tribune Publishing, most of it purchased from former Chairman Michael Ferro in late 2019. Thus its bid, announced at the end of 2020, is technically for the remaining 68%.
  • For a transaction to be completed, Alden must agree to terms with a special committee composed of the three independent members of Tribune Publishing’s board. Alden controls three other seats, having placed its founder, Randall Smith, on the board last year. CEO Terry Jimenez is a seventh member.
  • If the special committee does approve, the deal proposal would then go to a vote of the 68% of shareholders not affiliated with Alden. (Alden’s own 32% is put to the side in this ratification process.)
  • Two-thirds approval by the non-Alden owners is required. That works out to 45.2% of all the stock.
  • Soon-Shiong owns 24%, others 44%. Without at least some of his shares, therefore, Alden and Tribune Publishing would be just short of the 45.2%  they need to go forward.

A straight path to takeover isn’t assured

Alden’s initial bid has been on the table for nearly two months now. Neither side has publicly indicted any movement.

However, as I found out after covering New Media Investment Group’s successful six-month campaign to acquire Gannett in 2019 (New Media’s GateHouse chain of newspapers took Gannett’s name), dozens of meetings may be taking place in private, even while everything looks quiet from the outside.

In the Gannett merger, exhaustive detail on the behind-the-scenes back-and-forth was ultimately offered in a required Securities and Exchange Commission prospectus that ran to 384 pages.

Alden did not offer a generous premium (11% over the last trading day close) with its $14.25 a share offer. Then stock quickly began trading at a higher price. It ticked up further after last Thursday’s Wall Street Journal update, closing Friday at $15.95 a share.

Wall Street is thus showing confidence that there will be a deal and at an increased price, probably from Alden, though conceivably from some other investor who decides to jump in with a competing bid.

Alden has artfully closed in on Tribune Publishing, gradual step by step. Newsrooms and other parts of the organizations have already experienced many cuts in the last 18 months, a sign of Alden’s influence.

Tribune papers also have been selling off real estate and outsourcing printing at an accelerating pace. Experienced CEO Timothy Knight and two top executives of the flagship Chicago Tribune departed early last year. Chief financial officer Jimenez then moved up into the CEO role.

All three of the independent Tribune Publishing directors are from financial backgrounds, as are all three Alden directors. No one at the top has any journalism or publishing experience.

Even if it’s all about the money now, a straight path to an Alden takeover is not assured.

Some possible variations are in the mix. For instance, two Baltimore foundations and a rich Maryland businessman have separately shown interest in buying “certain assets,” as Alden put it in its December SEC filing. That suggests that The Baltimore Sun might be peeled off from the others at a premium that would enrich Alden, Tribune Publishing and Soon-Shiong.

Or Alden’s effort could fall apart — no deal. The fund swung and missed in an earlier takeover bid for Gannett.

Still, the simplest outcome seems the most likely.

Before the December bid, when I first visited the topic of Soon-Shiong’s role last June, my thesis was similar. The math was less complicated. Put Alden’s 32% together with his 24% and presto, Alden has majority control.

Look for it to happen. Look for all or nearly all Tribune properties to join Alden’s MediaNews Group family — once also widely known as Digital First Media — by later this year. Those holdings include The Denver Post, The Orange County Register, Boston Herald and groups of dailies in the Los Angeles and San Francisco metro areas.

Then look for Alden to run its new conquests the same way it has its old ones.

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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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