Tribune's New Top Shareholder? The Guy Who Runs the Chicago Sun-Times

A new moneyman with his own ideas about the future of news is in the house for Tribune Publishing, home to the Chicago Tribune, and his newfound presence is a bit of an irony.

Michael Ferro, 49, majority owner of the rival Chicago Sun-Times, is now the largest shareholder and new non-executive chairman of Tribune Publishing, the Chicago Tribune reported Thursday, through his company Merrick Media in a $44.4 million stock deal that gives him a 17 percent stake in the company.

Media journalist Robert Feder surmises that a merger between the Tribune and Sun-Times “would seem inevitable.”

This is an interesting plot twist in the soap opera we might call “As the Newspaper World Turns.”

Ferro, who assembled partners to acquire the Sun-Times Media Group in 2011 through Wrapports, Inc., and later the Chicago Reader, sold the suburban Chicago dailies and weeklies to the Tribune in 2014 for $20 million. The Tribune bolstered its suburban circulation numbers with the purchase, and recently concluded a round of voluntary buyouts to trim staff by about 10 percent across all publications.

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Ferro will have a significant say in the future of Tribune Publishing. The Sun-Times reports that Ferro moved out of his Sun-Times office on Wednesday and will move into the Tribune Tower.

“An innovative technology and media entrepreneur, Michael has a successful track record developing companies in the midst of transformation,” reads a memo to Tribune staff sent Thursday by Jack Griffin, CEO of Tribune Publishing. “Michael is a strong believer in journalism, in the importance of independent news and editorial voices and the value that is derived from the content our talented journalists create.”

By noon, after word of the transaction broke, Tribune stock had dropped 26 percent, trading at less than $7 a share.

Crain’s Chicago Business reported on terms of the deal:

Ferro’s Merrick Media can’t acquire more than a 25 percent stake in Tribune, or sell any shares, for three years. Afterward, it can’t sell more than 25 percent of its stake a year.

Tribune Publishing has struggled since it split in July 2014 with the company’s broadcast television division, now known as Tribune Media. Tribune Publishing’s stock hit a low of $7.03 on Jan. 20, two-thirds below its 52-week high of $21.94 last February. The stock closed yesterday at $9, up 4 percent. It went public at $24.50. Its market cap is $235 million, making it a microcap stock.

The infusion from Merrick will more than double Tribune Publishing’s coffers of $41 million cash, which could allow the company to buy more newspapers.

Tribune Publishing also has indefinitely suspended dividends for stockholders. A stock analyst told the L.A. Times the Ferro stock deal was not particularly good news for other Tribune Publishing shareholders as the value of their stakes are diminished.

“It was a big, dilutive offering, and they cut the dividend,” Hamed Khorsand of Woodland Hills research firm BWS Financial said. “No part of this is friendly to investors.”

Ferro will relinquish day-to-day control of Wrapports and the Sun-Times, according to the Tribune report.

• John Canning, co-founder of Madison Dearborn Partners, will be Wrapports chairman.
• Jim Kirk, Sun-Times publisher and editor, a former Tribune business editor, will join the board.
• Bruce Sagan, 87, a Wrapports board member, publisher of the Hyde Park Herald (which he’s owned since 1953) and former owner and publisher of the Daily Southtown, will become chairman of Sun-Times Holdings.

When Ferro purchased the Sun-Times, there was much speculation he really desired to get his hands on the Tribune, which was in bankruptcy. In 2013, Ferro reportedly set in motion plans to bid on Tribune assets.

Now, he’ll be involved in Tribune strategy and acquisitions.

“I see tremendous upside to create value and put Tribune Publishing at the forefront of technology and content to benefit journalists and shareholders,” Ferro said in a statement.

Feder notes Ferro has had issues running the Sun-Times:

A self-styled tech entrepreneur, Ferro has been a controversial figure since he acquired the Sun-Times in December 2011. While failing to improve the paper’s digital presence, he has made drastic cuts to the print product and editorial operation. Once a lightning rod for criticism, Ferro more recently has lowered his public profile and distanced himself from the Wrapports brand. In 2015 he took his name off the editorial masthead of the Sun-Times.

“As nutty and crazy as he is, Ferro has kept the Sun-Times alive,” said a source close to both companies. “You have to give him credit for that.”

The Tribune’s own strategy also has been suspect, however.

And last November, media mogul Rupert Murdoch suggested Tribune Publishing was on the sales block. Apollo Global Management, approached Tribune Publishing in October, reported Ken Doctor, author of Newsonomics and an expert on the changing media business, to discuss a sale and a breakup of the publisher. The Tribune rebuffed them and publicly denied any talk of sale.