- Published on Monday, 23 May 2016 09:00
For the second time this month, Tribune Publishing's Board of Directors informed Gannett Co., Inc. that it is rejecting their unsolicited purchase offer, even thought the offer was greatly increased recently. With the newest rejection coming early Monday morning, unlike the first rejection, the Tribune Publishing Board did not completely slam the door closed to future negotiations with Gannett. At the same time, the Tribune Publishing Board announced a new Vice-Chairman and a new massively large shareholder who has invested heavily into the company.
Gannett has been attempting to purchase all of Tribune Publishing since last month. Unfortunately for Gannett (and the shareholders who want to sell the company to Gannett to make a profit) the newly-installed Tribune Publishing Board Chairman, who bought his way
to the top of the company less than four months ago, is in no hurry to give up his new high profile, ego-driven position of running Tribune Publishing.
The saga so far...
In mid-April, Gannett made an unsolicited bid for Tribune Publishing, offering to purchase
all outstanding shares of common stock of the company for $12.25 in cash per share. Along with the cash deal for stocks, Gannett would also assume all $390 million of debt that Tribune Publishing disclosed as of the end of last year.
After making the offer to purchase Tribune Publishing but getting nothing but the runaround from new Tribune Publishing Chairman Michael Ferro and his hand-picked Tribune Publishing CEO Justin Dearborn, Gannett Company went public
with their offer in late April to make sure that the Tribune Publishing Board of Directors and shareholders saw the proposal.
Gannett then increased the pressure
to help facilitate a favorable response from Tribune Publishing by filing preliminary proxy materials with the U.S. Securities and Exchange Commission. In its filing, Gannett is openly asking all Tribune Publishing shareholders to enter "WITHHOLD" votes in connection with the upcoming 2016 Annual Meeting of Stockholders for Tribune Publishing, which is scheduled for June 2nd. Gannett wants all eight of Ferro's hand-picked nominees to not be supported automatically by shareholders, which would send a message that Tribune Publishing needs to negotiate in good faith for its shareholders in regards to the Gannett purchase offer.
In addition, Gannett requested records for all Tribune Publishing shareholders so that Gannett can communicate directly with them. Gannett is legally allowed to do so under Section 220 of the Delaware General Corporation Law. It has since been sending letters directly to shareholders.
On May 4th, Tribune Publishing's Board of Directors flatly rejected
the initial offer of approximately $815 million -- what could have been an over 60% gain for shareholders of Tribune Publishing stock. No counter-proposal was issued. The Chicago-based Tribune Publishing Board called Gannett's large bid "opportunistic" and that the offer "understates the Company's true value and is not in the best interests of its shareholders."
The Tribune Publishing Board is claiming that new Chairman Ferro's plans for the company would increase the value to shareholders more than the Gannett buyout would. Among Ferro's somewhat-vague plans are the creation of a business unit named Tronc, which will use widgets to better target digital readers with in-house aggregated news product, which in turn would supposedly increase digital revenue. Ferro also wants to open seven new foreign bureaus for the Los Angeles Times, in the hopes that other newspapers would pay to use the LA Times' news stories.
Tribune stocks began falling when the plans were revealed and Tribune Publishing rejected the Gannett offer.
As a way to scare off Gannett, Ferro and the Tribune Publishing Board recently announced
they would enact a limited duration Shareholder Rights Plan. Best known as a "poison pill," the plan seeks to make a purchase of the company from an outside source near impossible for a year. The Tribune Publishing "poison pill" plan would kick in ten days following a public announcement "that a person or group has acquired 20% or more of Tribune's common stock or has commenced a tender offer which would result in the ownership of 20% or more of Tribune's common stock." What this does is allow all shareholders, other than the new purchaser, to get the same amount of shares at double the value of what the purchaser paid. This would prevent Gannett from gaining controlling stock from the many shareholders who wish to sell to Gannett.
Last week, Gannett made a new unsolicited purchase offer for Tribune Publishing and immediately went public with it to insure shareholders were aware of it. The new offer has Gannett purchasing all Tribune Publishing stock for $15.00 a share in cash. Gannett will also assume Tribune Publishing's $385 million in debt, making the new offer a total of approximately $864 million.
Instead of calmly saying the company would review the new offer, Tribune Publishing Board Chairman Ferro instead started bragging to people that he would instead try to purchase Gannett
. Being that the cost of purchasing Gannett would probably exceed $2 billion, Ferro's bragging is not likely to ever become a reality. It is just another way of annoying the Gannett executives, since Ferro is feeling annoyed by them because they are possibly ruining his plans for being a national media barron.
Gannett then countered by outing private conversations from Ferro, revealing in a letter
to Tribune Publishing shareholders that Ferro has asked for a "significant role" and to be the "largest shareholder" in Gannett for him to approve the sale. In that open letter to shareholders, Gannett's Board of Directors wrote: "Mr. Ferro has made clear that his own self-interest, and not the best interests of all of Tribune's stockholders, is guiding his response to Gannett's offer."
The second largest Tribune Publishing shareholder, Oaktree Capital Group, had been quietly pushing for a Tribune Publishing sale to Gannett or to other potential buyers. Earlier this month, that talk went public, with Oaktree entering a filing with the U. S. Securities and Exchange Commission (SEC), done for all shareholders to see, openly urging the Tribune Publishing Board to hold active talks with Gannett. Of course, that did not sit well with Ferro.
Early this morning, Tribune Publishing announced it had a new
second largest shareholder, knocking Oaktree down to third place. Nant Capital, LLC, which was founded by Dr. Patrick Soon-Shiong, is purchasing 4,700,000 shares of Tribune Publishing common stock at $15.00 per share, giving the company $70.5 million. Nant Capital will now own approximately 12.9% of Tribune Publishing's outstanding shares.
Connected to that gigantic stock purchase, Soon-Shiong will take over as Vice Chairman of the Tribune Publishing Board of Directors, effective June 2nd. Soon-Shiong is a billionaire with a background in medicine and no media or publishing experience at all.
Between Ferro and Soon-Shiong, two men with limited or no publishing experience now own approximately 30% of Tribune Publishing. The addition of Soon-Shiong as Vice Chairman is the second major Board change this year done entirely without shareholder consent, permission, or advance knowledge. Both of these are facts that cannot sit too well with longtime Tribune Publishing shareholders.
After the Nant Capital announcement early this morning, the Tribune Publishing Board of Directors formally rejected the newest Gannett proposal. They claimed the proposal was "not in the best interests of Tribune shareholders." No counter offer was given and no timetable is being set for further discussions.
However, the Tribune Publishing Board did state that they would be open to further talks with Gannett, but only if Gannett were to first to agree to a mutual Non-Disclosure Agreement. This agreement would forbid Gannett from taking its offers public or discussing its plans with shareholders. While this is quite common with most corporate transactions, Gannett has a good reason to be uncomfortable with such an agreement in this case.
Gannett knows from its experience with the current Tribune Publishing CEO and Chairman that its offers do not necessarily reach the shareholders, nor is the Ferro-led Board necessarily acting in the shareholders' best interests. By going public and directly communication with the shareholders, Gannett is assured that their offers are reaching them.
Tribune Publishing is saying talks will only commence if Gannett agrees to keep quiet and stay secretive. The Tribune Publishing Board also added there would be no assurances made that any agreement could be made between the two sides, even if done behind closed doors.
CEO Dearborn stated in this morning's announcement:
The Gannett $15.00 per share proposal for all of Tribune is clearly inadequate as a control investment in Tribune and, as ISS has pointed out, our Board 'has grounds to decline to engage' on Gannett's proposal. We remain unrelenting in our pursuit of value whether on a standalone basis or through a transaction, and believe the $70.5 million growth capital investment announced today from Nant Capital -- making Nant Tribune's second largest shareholder -- will support Tribune's transformation strategy.
We continue to have serious doubts about Gannett's ability to enter into a transaction -- especially when you consider its approximate $650 million pension and OPEB liability -- that makes sense for Tribune and its stakeholders. However, we stand ready to work with Gannett to assess whether there is a path forward that will create more value for both sets of shareholders. We have no preconceived ideas about where these discussions might lead, but the Board is committed to engaging further in an effort to identify potential additional value for the Company's shareholders.
Regardless of the outcome of the discussions with Gannett, we are confident that we have the right strategic plan in place to leverage technology and effectively monetize our world class content. We are focused on taking the necessary steps to transform our business in response to the massive changes that have overtaken the publishing industry, supporting our outstanding journalists and, above all, creating superior value for our shareholders.
Following the Tribune Publishing rejection today, Gannett's Board of Directors issued the following statement:
Despite repeated efforts by Gannett to engage with Tribune regarding its $15.00 per share all-cash premium offer, Tribune has continued to take actions that Gannett believes are designed to convey disproportionate control of the enterprise to select stockholders while ignoring its duties to all Tribune stockholders. Gannett notes that Tribune issued 4.7 million shares of common stock to a single investor, who will also be added to the Tribune Board, at the same price at which Gannett offered to purchase all outstanding Tribune common shares. This share issuance, when combined with the shares sold to an entity controlled by Tribune Chairman Michael Ferro, gives two members of the Tribune Board an ownership position of approximately 30 percent. Tribune again changed the composition of its board without stockholder participation; the newest appointee will not be subject to a stockholder vote for another year.
Gannett notes that Tribune has been in possession of a customary non-disclosure agreement provided by Gannett for more than a month without reply, while the version Tribune has proposed would require Gannett to effectively cease any public proxy solicitation or other public pursuit of a transaction.
Gannett will review whether to proceed with its acquisition offer taking into account the results of the 'WITHHOLD' vote at Tribune's 2016 Annual Meeting, the Tribune Board's response to Gannett's $15.00 per share offer and the latest Tribune actions.
Gannett is continuing to urge all Tribune Publishing stockholders to vote "WITHHOLD" on the gold proxy card for the 2016 Annual Meeting of Stockholders. The eight hand-picked Directors of Ferro's that would be impacted by the "WITHHOLD" votes are Carol Crenshaw, Justin Dearborn, David Dibble, Philip Franklin, Eddy Hartenstein, Richard Reck, Donald Tang, and Michael Ferro, Jr. himself.