Another investor criticizes Tribune’s moves, but 2 more proxy advisors back its board

Los Angeles Times

A large shareholder of L.A. Times owner Tribune Publishing has questioned the company’s decision to turn down a buyout offer from Gannett and sell millions of new shares to billionaire Patrick Soon-Shiong.

(Al Seib / Los Angeles Times)

Another major Tribune Publishing investor is crying foul over the company’s rejection of Gannett’s buyout offer -- even as two more advisory firms weighed in to give the board cover against a possible shareholder lawsuit.

In a letter sent Tuesday to Tribune’s board, St. Louis investment firm Towle & Co. criticized as "disturbing developments” Tribune’s decisions to turn down Gannett and bring L.A. billionaire Patrick Soon-Shiong on board as an investor. 

The letter echoed concerns raised last week by Tribune’s third-largest shareholder, Oaktree Capital Management. Both investment firms made an implicit threat of a shareholder lawsuit.

But such a suit may be difficult to win thanks to reports from firms that advise public company shareholders. On Tuesday, Glass Lewis and Egan-Jones Ratings Co. said it appeared that Tribune’s board gave Gannett’s offers a serious look before turning them down.


“That the board ultimately arrived at a negative reply in each case does not, on its own, suggest there was an inadequate review of each offer, in our view,” the Glass Lewis report said.

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Institutional Shareholder Services, another advisory firm, released a report over the weekend making a similar case.

In its letter, Towle called the stock sale to Soon-Shiong’s firm, Nant Capital, “most distasteful” and said the deal, which diluted the holdings of Towle and other existing Tribune shareholders, is a clear sign the board is not looking out for shareholders.


 Towle holds a nearly 4% stake in Tribune, making it the company’s sixth-largest shareholder. It had ranked fifth until Tribune over the weekend sold 4.7 million new shares to Soon-Shiong in a deal that makes the biotech entrepreneur the company’s No. 2 shareholder and gives him a seat on Tribune’s board starting next month.

“Your brazen efforts of late have disrupted our belief in fair play,” Towle executives wrote. “We now believe your primary interest is self-interest. You have fully demonstrated a lack of concern for the majority of unaffiliated shareholders whom we believe want a fair and reasonable transaction with Gannett.”

That kind of language could indicate the firm is considering suing the board for failing to act in shareholders’ best interests. Oaktree used similarly threatening language in a letter last week, saying the board’s only reasonable course of action would be to pursue a deal with Gannett.

Also like Oaktree, Towle in its letter questioned the tech-heavy turnaround strategy outlined by Tribune Chairman Michael Ferro and Chief Executive Justin Dearborn.

“The gut-wrenching transformation of newspapers to the digital age is complex and difficult,” Towle wrote. “There is a possibility that you won’t attain your lofty turnaround goals.”

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J. Ellwood Towle, chief executive of Towle & Co., told The Times he could not comment on the possibility of a shareholder suit, but added that he was “very, very disappointed” with Tribune’s recent moves.

Tribune spokeswoman Dana Meyer said any assertion that the board is not working on shareholders’ behalf is “simply false.”


In a statement, Tribune CEO Dearborn said the reports from the three advisory firms send “a clear message that the board has taken the right approach to protect Tribune shareholders." 

The Egan-Jones report noted that Gannett’s proposal “is an an attempt to disrupt the company’s efforts and strategies toward its transformation.” Tribune Publishing’s board nominees, the report said, will help lead the company to “an improved status.”

Twitter: @jrkoren


Tribune Publishing Chairman Michael Ferro says Gannett is ‘trying to steal the company’

Who is Patrick Soon-Shiong, Tribune Publishing’s new No. 2 shareholder?


L.A. billionaire Soon-Shiong gets $148-million payday even as his firm’s stock tanks


10:05 p.m.: This story has been updated to include information about a report from advisory firm Egan-Jones Ratings Company and statements from Tribune Publishing CEO Justin Dearborn.

3:02 p.m.: This story has been updated to include information about a report from advisory firm Glass Lewis.

This story was first published at 1:42 p.m.

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