The hedge fund trying to take over Tribune Publishing — owner of the Chicago Tribune, the New York Daily News and eight other newspapers — is running into strong resistance from a union representing its journalists as well as some shareholders.
Alden Global Capital and its chairman Heath Freeman, which already owns 31.6 percent of the Tribune common stock, submitted a surprise request on New Year’s Eve to be allowed to negotiate to buy the rest of the company for $14.25 a share.
That would value the whole company at a $520 million, but Alden would only need to fork over $366 million to snap up the shares it doesn’t already own.
Only critics are already blasting it as a lowball offer.
“Our initial reaction is that this offer is significantly too low,” noted Doug Arthur an analyst at Huber Research. He pointed out that the $14.25-a-share offer is only 3.6 times Tribune’s estimated for 2020-21 EBITDA — or earnings before interest, taxes, depreciation and amortization, a key financial metric. In contrast, USA Today owner Gannett, even with its heavy debt load, trades at 5.1 times earnings.
Arthur thinks any offer should be priced in the $15 to $17 a share range.
Mason Slaine, Tribune’s third-largest shareholder with a 7.9 percent stake, seems to agree, telling the Chicago Tribune that Alden’s offer “seems low.”
The wild card is Dr. Patrick Soon-Shiong, Tribune’s second-largest shareholder, who has a 24-percent stake in the company and has remained mum. Soon-Shiong already bought the LA Times and the San Diego Union Tribune from Tribune for $500 million back in 2018.
But the LA Times has lost tens of millions since he bought it and his energy of late has been devoted to his career in the health care industry, where he’s been scrambling to develop low-cost, easy-to-administer vaccines to combat COVID-19.
Soon-Shiong bought in around $13 a share so $14.25 would represent a small profit. But even traders on Wall Street seem to anticipate a higher offer with the stock closing Tuesday at $14.84, up 17 cents on the day.
Tribune said it expects to have revenue of $670 million to $690 million in 2021 and EBITDA of between $105 million and $113 million. At year end it completed the $160 million sale of Best Reviews, where it had a 60-percent stake, to Nexstar, further helping its balance sheet.
Jon Schleuss, national president of the NewsGuild, which represents eight of the nine Tribune papers (only the journalists at the Daily News do not have a contract) blasted the bid by Alden, which has long had a reputation in newsrooms as a cost-slashing vulture capitalist.
He also called for the three Alden-appointed members of the board to be removed for “corporate malfeasance” for failing to disclose Alden’s acquisition to the rest of the board in a timely fashion.
“Alden is treating Tribune shareholders with the same disrespect it has for its employees, the newspapers they own and the communities they serve,” Schleuss said.
“We respectfully request that the Tribune Publishing board of directors convene a special meeting of shareholders as soon as possible to vote on the immediate removal of Randall D. Smith, Christopher Minnetian and Dana Goldsmith Needleman,” the Guild said.
The trio were the appointees that Alden made to the board last year, after it had acquired the 31.6 percent stake in November 2019 by buying the shares once held by former chairman Michael Ferro, making Alden the company’s single largest shareholder.
Alden has also agreed to not buy additional shares until July 2021, but the agreement apparently didn’t preclude Alden from making an inquiry for the entire company.
Arthur at Huber Research said anything is possible, but Soon-Shiong’s “main interest and investment seems to be the LAT. He’s got his hands full there as well as with COVID-19 solutions at his health companies.”
His stake in Tribune would be valued at $124.8 million. He’s shown a willingness to invest in the LA Times, but might also welcome a sudden cash infusion as the paper, which is in the market for a new editor-in-chief, is said to be losing $50 million a year.
Tribune CEO Terry Jimenez in a letter to employees called the offer a “distraction.”
But the company said late last week that the company has formed a committee of the independent, non-Alden board members to evaluate the bid and has yet to issue a formal response to Alden.