The union representing the Chicago Tribune newsroom has called for the removal of three members of Tribune Publishing’s board who represent Alden Global Capital, the hedge fund trying to buy the newspaper chain and take it private.
Alden, which owns 32% of Tribune Publishing, made a nonbinding proposal Dec. 14 to buy out other shareholders for $14.25 per share, with plans to take the Chicago-based newspaper company private. The hedge fund disclosed the offer in a Dec. 31 Securities and Exchange Commission filing.
In a letter Monday to Tribune Publishing Chairman Philip Franklin, the Chicago News Guild alleges the Alden representatives violated SEC rules by failing to disclose the offer to Tribune shareholders within 10 days.
“The union has its facts wrong and has reached several incorrect factual and legal conclusions,” Alden said in a statement Tuesday. “Most importantly, as our letter makes perfectly clear, our offer was made in conformance with legal and fiduciary requirements.”
Tribune Publishing spokesman Max Reinsdorf declined to comment Tuesday.
Lisa Braganca, a Skokie-based securities attorney and former SEC enforcement branch chief in Chicago, said Alden was required to file its proposal to buy Tribune Publishing “promptly,” but that the 10-day rule applied only to an initial acquisition of a 5% or greater stake. Braganca is not involved in the dispute.
She said it may be up to regulators to determine if the 17-day lag between the offering and the filing was prompt enough.
“As soon as they made that offer, or they put that nonbinding proposal in front of the board, that shows that their intent has changed, that their plan for their ownership has changed,” Braganca said.
As part of its SEC filing, Alden said it had a “brief conversation” Dec. 11 with Stewart Bainum, chairman of Choice Hotels International, a Rockville, Maryland-based hotel chain. who expressed interest in “certain assets” of Tribune Publishing.
The union alleges that Alden’s SEC filing was a “signed confession of corporate malfeasance” that put the hedge fund’s interest above the shareholders.
“It is clear from the filing that Alden’s purpose here was to collude with the said investor to reach an agreement on the purchase of Tribune shares,” the union said in its letter.
The Chicago News Guild is a longtime Tribune Publishing shareholder, and currently owns 175 shares, according to the union.
In addition to the Chicago Tribune, Tribune Publishing owns the Baltimore Sun; the Hartford (Connecticut) Courant; the Orlando (Florida) Sentinel; the South Florida Sun Sentinel; New York Daily News; the Capital Gazette in Annapolis, Maryland; The Morning Call in Allentown, Pennsylvania; the Daily Press in Newport News, Virginia; and The Virginian-Pilot in Norfolk, Virginia.
A New York-based hedge fund with a reputation for sweeping layoffs at its newspaper properties, Alden owns about 200 publications through an operating company known as MediaNews Group.
Alden acquired its stake in Tribune Publishing in November 2019, mostly through buying former nonexecutive chairman Michael Ferro’s holdings. The hedge fund added two members to Tribune Publishing’s board at that time as part of a standstill agreement restricting it from buying additional shares.
In July, Tribune Publishing added Alden co-founder Randall Smith to the newspaper company’s board and extended the standstill agreement until June 2021. While the agreement ostensibly prevented a hostile takeover, it did not preclude Alden from making a tender offer to buy Tribune Publishing — with board approval.
On Dec. 31, following Alden’s SEC filing, Tribune Publishing issued a statement saying its board had designated a special three-member committee of independent directors and hired financial adviser Lazard to review Alden’s proposal.
Charles Elson, a professor of corporate governance at the University of Delaware, said the formation of a special committee and the recusal of the Alden board members is how most companies handle similar situations. At the same time, Elson said it might be prudent if the Alden directors exited the board entirely.
“It creates a conflict of interest that is frankly unsolvable,” Elson said. “Their independence will be questioned, certainly. And, you know, they still have to tread very carefully.”
Beyond board approval, Alden will need two-thirds of Tribune Publishing’s other shareholders to sign off on the deal, according to the Dec. 31 SEC filing.
