Chicago entrepreneur buys a large stake in L.A. Times owner
A view of the Los Angeles Times building from the City Hall observation deck.
Chicago entrepreneur Michael Ferro is investing $44.4 million in Los Angeles Times owner Tribune Publishing Co., making him the company’s largest shareholder and infusing cash that could bolster a planned bid for the Orange County Register.
Ferro, through his firm Merrick Media, bought 5.22 million newly issued shares of Tribune Publishing stock, giving him a 16.6% stake in the company, which also owns the San Diego Union-Tribune, the Chicago Tribune and several other daily newspapers.
As part of the deal, he replaces Eddy Hartenstein, a former Times publisher, as non-executive chairman of the Tribune Publishing board, the company said Thursday. Hartenstein will retain a board seat.
The influx of cash comes as Tribune Publishing, which has seen declining revenue amid difficulties in the newspaper industry, prepares to bid for the Orange County Register, Riverside Press-Enterprise and other assets of bankrupt publishing company Freedom Communications.
Last year, Tribune Publishing bought the San Diego Union-Tribune. Adding the Orange Country Register and Riverside Press-Enterprise to its portfolio would make Tribune Publishing the dominant newspaper group in Southern California.
Initial bids for Freedom’s assets are due Feb. 12, and an attorney for Tribune Publishing said this week that the company is in “advanced stages” of putting together an offer. An auction is scheduled for next month.
Tribune Publishing Chief Executive Jack Griffin said that Ferro’s investment is not earmarked for any specific acquisition but that “it bolsters our ability to actively be in acquisition mode.”
The investment goes a long way toward answering how Tribune Publishing, already carrying a large debt load, might finance a purchase of Freedom.
Tribune Publishing also said it is suspending dividend payments indefinitely -- a move that will preserve cash by saving about $18 million a year.
Ferro, 49, who is one of Chicago’s best-known tech entrepreneurs and philanthropists, already has interest in media companies.
He is chairman of Wrapports, which in late 2011 bought the Chicago Sun-Times, a smaller rival of the Chicago Tribune. In 2014, Wrapports sold 38 daily and weekly newspapers serving Chicago suburbs to Tribune Publishing for $23.5 million -- a deal that Griffin said ultimately led to the investment in Tribune Publishing.
Ferro has given up operational duties at the Sun-Times, Tribune Publishing said.
Before his foray into publishing, Ferro founded Click Commerce, a business software developer he took public in 2000 then sold in 2006 for $292 million.
His most notable recent payday came last year, when IBM acquired Merge Healthcare, a medical imaging technology company in which Ferro had invested in 2008, for $1 billion. Ferro and his private equity firm, Merrick Ventures, earned a reported $190 million from the deal.
“I am excited to be working with the great journalists at these award-winning brands,” Ferro said in a prepared statement. “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 he is “especially excited” to be associated with The Times, which he called “one of the great newspapers in the country.”
His investment comes about six months after an expression of interest by Los Angeles billionaire Eli Broad in buying the Los Angeles Times and the San Diego Union-Tribune from Tribune Publishing. That overture wasn’t pursued because company executives said they believe the California papers are a key part of Tribune Publishing’s strategy.
Subsequently, Austin Beutner, a prominent Los Angeles businessman close to Broad, was dismissed after one year as publisher of The Times over differences with Griffin.
Shares in Tribune Publishing have lost about 65% of their value since they began public trading in mid-2014, and the issuance of new shares will dilute the holdings of existing shareholders.
Ferro bought in at $8.51 a share, a 5.5% discount to Tribune Publishing’s closing price Wednesday, the day the deal closed.
Ferro displaces Los Angeles investment firm Oaktree Capital Management as Tribune Publishing’s largest shareholder. Oaktree saw its 17.9% stake shrink to 14.9%.
As part of the share purchase agreement, Ferro must hold his shares for at least three years and cannot amass more than a 25% stake in the company, according to people with knowledge of the deal.
