When Jack Griffin announced he'd wrangled a $44-million cash infusion for Los Angeles Times owner Tribune Publishing Co., he portrayed it as a vote of confidence in his business strategy, including his plan to acquire more newspapers such as the Orange County Register.
But Tuesday, less than three weeks later, Griffin was out as chief executive, replaced by Justin C. Dearborn, a longtime associate of the man behind that $44 million: Chicago entrepreneur and investor Michael Ferro.
Griffin's ouster appears to have been orchestrated by Ferro, now the largest shareholder and chairman of Tribune Publishing.
Dearborn is former chief executive of Merge Healthcare, a Ferro-backed, Chicago-based information technology firm acquired by IBM in October for $1 billion. He has worked for Ferro since at least 1997.
Tribune Publishing issued the announcement early Tuesday morning but provided no details explaining the change in leadership. A company spokesman declined additional comment and said the two would speak to investors during an earnings conference call next week. It is unclear how the shake-up might affect the company's bid for bankrupt Register owner Freedom Communications.
“The board thanks Jack Griffin for his significant contributions and wishes him the best of luck in his future endeavors,” Ferro said in Tuesday's statement.
Tribune Publishing shares fell 13 cents or 1.8%, to close at $7.21 on Tuesday.
Griffin's ouster was first reported late Monday by media industry analyst Ken Doctor, who said Griffin did not see the firing coming.
“With the progress and foundation that has been laid, the timing is right for a new leader to come on board and lead Tribune Publishing through its next phase of transformation,” Griffin said in Tuesday's statement.
Griffin brought Ferro into Tribune Publishing not quite three weeks ago, hoping to use a cash infusion from the Chicago investor to back a purchase of the Orange County Register.
In a deal announced Feb. 4, Ferro invested $44.4 million to buy newly issued Tribune Publishing stock at $8.51 a share. The 5.22 million shares gave him a 16.6% stake in the company, displacing Los Angeles-based investment firm Oaktree Capital as the largest shareholder.
In a conference call with Tribune Publishing employees, held the day the investment was announced, Ferro, who is also part owner of the Chicago Sun-Times, promised to take an active role with the company.
When the deal was announced, there was no indication it would lead to an immediate management shake-up. Ferro bought shares in a private placement negotiated with Griffin and Tribune Publishing management, not on the open market.
Documents filed with the Securities and Exchange Commission show Ferro agreed that he would vote in line with recommendations made by board committees as to board nominations and corporate governance matters.
“It looked like Griffin had found a way to further his strategy — that he had found a business partner,” Doctor said. “It was not anticipated that there would be a transition and that Griffin would step down.”
Griffin and Ferro had done business before, with Tribune buying several suburban Chicago newspapers from Ferro's Sun-Times in October 2014. But Doctor said it was clear Griffin did not know whom he was dealing with. “Jack Griffin played an extremely bad hand at corporate poker,” Doctor said. “Mike Ferro is described as a guy with big ideas who is used to being the leader in whatever he does. Why would Griffin have expected this to go any different?”
Indeed, this isn't the first time Ferro has invested in and swiftly taken over a struggling company.
In 2008, when Merge was desperately short on cash and dealing with investigations into fraudulent accounting practices, Ferro's Merrick Ventures bought
$5 million of newly issued Merge stock and gave the company a $15-million loan.
The same day the deal closed, former Merge Chief Executive Ken Rardin resigned and Dearborn took over. Rardin, now chief executive of Atlanta-area healthcare technology firm BlueSky Healthcare Solutions, said he was given the option to stay with the company.
Ferro bought in to Merge at 35 cents a share. Within a year, shares were trading for about $3. In October, Merge was acquired by IBM for
$1 billion, or $7.13 a share.
Doctor said Ferro over the last few weeks held meetings with top Tribune Publishing executives and persuaded the company's board to jettison its chief executive. “They gave him quick approval to fire Griffin,” Doctor said.
Griffin's contract was set to expire in March 2017. He is entitled to severance pay of $2 million — twice his annual salary — plus $1.5 million in stock options and grants he would have accrued over the next 12 months.
That's on top of any bonuses and stock options or awards he's eligible to receive from the 2015 fiscal year. Tribune will pay for Griffin's health and dental benefits for a year or until he takes a new job.
Compared with Griffin's, Dearborn's two-year contract is relatively modest. He will earn $600,000 a year and be eligible for a bonus of about $420,000. He will not be given stock awards, according to a company filing outlining his compensation.
In Tuesday's statement, Dearborn, who previously worked for Ferro's firms Merrick Ventures and Click Commerce, echoed some of Ferro's earlier comments about Tribune Publishing's future.
“I believe Tribune Publishing has a significant opportunity to leverage technology to increase the value of its content and distribution channels,” he said. “Although this is a different medium than my last technology company, it has the same challenge on how to create the highest value for our content.”
On the Feb. 4 conference call, Ferro said the publishing company needed to use “things like big data and artificial intelligence so that we monetize all of the data we have.”
Griffin was named chief executive in March 2014 when Tribune Publishing was being spun off from Chicago-based Tribune Co. Like most in the newspaper industry, Griffin has faced big challenges as print ad revenue and circulation declined.
He came under scrutiny last September after firing Austin Beutner, then publisher of the Los Angeles Times, because of a clash over whether the L.A. Times and San Diego Union-Tribune should remain part of the company.
Though Ferro this month called The Times the “crown jewel” of Tribune Publishing, it's not clear where he stands on that question or on the company's bid to buy the Orange County Register.