Tribune Publishing Rejects Gannett's Sweetened Bid

CHICAGO — Tribune Publishing has spurned a second, sweeter buyout offer from Gannett, saying the deal wasn't in the best interest of the shareholders.

At the same time, Tribune board Chairman Michael Ferro found another investor to take a sizable stake in the company and assume the vice chairmanship. Nant Capital bought $70.5 million in stock, the company announced Monday, and Nant founder Patrick Soon-Shiong, an L.A.-based billionaire scientist, surgeon, technologist and futurist, will become the board's vice chairman.

This makes Nant the second largest institutional shareholder and the latest maneuver in the newspaper war for control of the Chicago Tribune and its sibling newspapers.

Gannett's offer of $15 a share put the total value of its bid for all Tribune Publishing properties, which includes the Chicago Tribune, L.A. Times, Baltimore Sun and other papers, at $864 million. Gannett's previous bid was $12.25 a share.

On Monday, Tribune Publishing invited Gannett to enter into a non-disclosure agreement for future discussions. Tribune's recent moves, however, show a resolve to fight Gannett's effort to take over the newspaper company. The non-disclosure agreement allows Gannett to view some corporate information.

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Since publicly revealing its first offer for Tribune Publishing in April, Gannett has muscled up its efforts.

Last week, Gannett sent a letter to Tribune shareholders urging them not to back Tribune's proposed slate of board nominees as a protest to show interest in Gannett's bid. Gannett maintains that Ferro, CEO Justin Dearborn and the board of directors is not acting in the best interest of shareholders by rejecting Gannett's overtures.

The exchanges between Tribune Publishing and Gannett have turned increasingly acrimonious. Ferro told L.A. Times staffers recently he was putting together a plan to take over Gannett instead, media analyst Ken Doctor reported on May 19, an assertion both ridiculous and comic.

“I am going to bid on Gannett,” he told the group, according to a confidential source. “I have lawyers working on it.”

And he does: I’ve since learned Ferro has engaged attorneys working independently of Tribune Publishing itself to prepare it.

This bravado will likely meet skepticism in the industry, and among Tribune’s shareholders: Gannett is showing a market value of $1.84 billion today. That’s without whatever substantial premium any would-be raider would have to ante up.

Oaktree Capital, the largest institutional shareholder in Tribune Publishing with a 14.8 percent stake, in early May said Tribune should consider Gannett's offer and negotiate. After meeting with Ferro, Oaktree execs cast doubt on Ferro's turnaround plan.

“The ideas we have heard appear to be preliminary and involve great execution risk,” Oaktree vice chairman John Frank states in a letter released last week. “Companies with much greater resources than Tribune and with a substantial head start are struggling in a rapidly changing environment to effect digital change that is profound enough and quick enough to overcome the outgoing tide of print revenues. ...

“We have not seen anything to give us any confidence that Tribune on its own, with the resources and competitive position it has today, can achieve over any reasonable period of time the value for shareholders that we believe can likely be achieved through a transaction with Gannett.”

The only scenario apparently in which Ferro would support a Gannett buyout would be one where Ferro gets a substantial role in running the company. Politico Media reported on Friday that Gannett sent a letter to Tribune shareholders indicating what Ferro wants out of any deal to sell Tribune Publishing to Gannett.

Gannett said Ferro indicated support for a sale if he were to have a "significant role" at the company after the sale closed. Gannett also quoted him as saying he would have to be the company's "largest shareholder" and that he needed to get "a piece of the action" in order to engage.

Tribune Publishing responded with its own statement Friday before rejecting the bid on Monday:

"Notwithstanding the fact that Gannett continues to engage in the reckless use of false and misleading comments about the meeting between the companies on May 12 and has resorted to ad hominem attacks on the Tribune Publishing Board, our Board is in the process of dispassionately, thoughtfully and thoroughly reviewing Gannett’s latest proposal and will respond to it in short order.”

After making a $44 million investment in Tribune in February, Ferro sent the man who brought him in, CEO Jack Griffin, packing, replaced him with Dearborn and began calling all the shots. Ferro put his controlling stake in the Chicago Sun-Times, which he acquired in 2012, into an unnamed charitable trust.

Gannett, in trying to persuade shareholders to back its play, cast aspersions on Ferro's stewardship of the Sun-Times: "... his tenure as an ineffective operator with The Chicago Sun-Times is well-documented and resulted in a poor outcome."

Ferro's plans for Tribune Publishing are much grander, however, whatever they actually are. Ferro envisions the L.A. Times as a global entertainment brand. He's also talked vaguely about how Tribune Publishing can beat Google and Facebook at their own game.

Ferro's first visible acts at Tribune Publishing after ousting Griffin include:

• Making the editors of all Tribune papers editor-publishers
• Firing Chicago Magazine's editor and hiring Susana Homan, the editor of the Sun-Times' celeb-focused Splash magazine, to replace her
• Buying Splash, the mag he created at the Sun-Times, and giving the pub back to Homan
• Taking Oscars tickets set aside for the L.A. Times entertainment reporting team for himself and his new CEO
• Bringing Aggrego's "Chatter" network of aggregated politics, sports and celebrity stories, the core of his failed national Sun-Times Network of metro websites, into the Tribune newspaper websites