May 5, 2021

The NewsGuild, long a fierce critic of Alden Global Capital, is now trying to persuade Tribune Publishing shareholders to reject the hedge fund’s bid for the company at a special meeting May 21.

The union advanced a number of arguments against the deal in a filing Wednesday with the Securities and Exchange Commission. The main one: The offer price of $17.25 undervalues the company.

The Guild represents newsroom workers in eight of nine Tribune Publishing metros — the exception being the South Florida Sun-Sentinel. It also owns some Tribune Publishing stock

The Guild’s brief highlights that Tribune Publishing CEO Terry Jimenez voted against the company board recommending the deal to shareholders and has indicated he will vote against it May 21.

Jimenez has two decades of experience in the industry and four as chief financial officer and CEO of Tribune Publishing. None of the other six directors has any publishing experience, the Guild contends, so Jimenez is the better judge of the company’s earnings potential.

Three of the directors are associated with Alden, which already owns 32% of the company. The other three are “independent” directors who formed a special committee to consider offers —  all three from nonjournalism financial backgrounds.

The Guild summarizes its position this way:

“Our members stand for journalism and organizations that create quality journalism, which is vital for political accountability and democratic governance at all levels. That gives us one reason to oppose a sale to Alden, particularly, since they have demonstrated a consistent policy of profiting from liquidating rather than building news publishers. Our other reasons, however, are as shareholders who seek maximum value from our investment.”

The Guild’s filing comes as Maryland investor Stewart Bainum Jr. is in the final stages of trying to put together a last-minute competing offer. A source familiar with his thinking said last week he is willing to put up as much as $200 million of his own money for a $680 million bid, $50 million more than Alden’s offer.

However, he needs to find a buyer for Tribune Publishing’s largest paper, the flagship Chicago Tribune, for the deal to work, the source said, and has so far been unable to do so. (An earlier provisional Bainum bid was in partnership with Swiss billionaire Hansjörg Wyss, who wanted the Chicago Tribune, but Wyss backed out three weeks ago.)

In addition to disputing the valuation, the Guild argues:

  • That Tribune Publishing’s financial adviser, Lazard Frères, used faulty comparisons in judging that Alden’s offer was a fair price.
  • That Alden’s financial condition raises doubt about its ability to stay solvent if it becomes the owner.
  • That Alden acted in bad faith in its negotiations last December with Bainum, who at the time was offering $65 million just for The Baltimore Sun.

The six-page brief ends with an appeal to investors who have “ESG mandates” — that is, those who consider environmental, social and governance factors likely to lead to the sustainability of a business in the long run.

Those considerations, the brief says, provide “more reasons why this deal needs to be rejected. The reputation of Alden Global Capital is well known among reporters at every newspaper in this country. It hollows out newsrooms.”

I am skeptical that the Guild will persuade shareholder voters, though the filing might also be read as the outline for a potential legal challenge to completing the sale to Alden.

Dr. Patrick Soon-Shiong owns a 24% stake in Tribune Publishing, as he accumulated leverage to buy the Los Angeles Times from Tribune for $500 million in June 2018.

As I reported in February, the rules for the shareholder vote are written so that Soon-Shiong has veto power if he thinks the deal is a bad one. He has not indicated how he will vote. In rejecting the offer, absent a new Bainum bid, he would be gambling that a better one comes along or that the value of his stock appreciates over time.

I asked a representative of Tribune’s special committee if he wished to respond and will add a comment if I get one.

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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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