Fight escalates between chairman of L.A. Times parent and L.A. billionaire
In the latest flare-up between the two top investors in the L.A. Times’ parent company, Tronc Inc. has accused Los Angeles billionaire Patrick Soon-Shiong of demanding an investment in his own company before he agreed to buy millions of shares in the newspaper publisher last year.
The allegation by an attorney for Tronc, contained in a letter filed Monday with the Securities and Exchange Commission, marks an escalation in the battle between Tronc Chairman Michael Ferro and Soon-Shiong.
Soon-Shiong declined to comment on the letter. Charles Kim, legal counsel for Soon-Shiong’s company, called Tronc’s allegation a “complete fabrication.”
Last summer, Tronc sold Soon-Shiong a 12.9% stake in the company for $70.5 million, a move that shored up support for Ferro’s plan to keep the company independent rather than sell to Gannett Co. The deal made Soon-Shiong the company’s second-largest shareholder after Ferro and gave him a seat on the board.
But any amity between the two seems to have crumbled.
In a March 27 letter sent to the company, Soon-Shiong argued that Tronc had made several moves adverse to shareholders and that serve only to entrench the current board and management. He also demanded that Tronc allow him to boost his stake in the company — which now stands at 26.7% — to 30%, something Ferro has been allowed to do.
In the response letter filed Monday, Tronc attorney Yosef Riemer said the board was expected to consider Soon-Shiong’s request at an upcoming meeting.
Riemer portrayed Ferro as a long-term shareholder whose interests in Tronc “are aligned with, and supportive of, the best interests of the stockholders as a whole.” He characterized Soon-Shiong as a self-interested investor trying to steer Tronc’s cash into his own enterprises.
Riemer wrote that Soon-Shiong, before agreeing to invest in Tronc last May, tried to get the company’s board to approve an investment by Tronc in NantHealth, a Soon-Shiong-controlled biotech company that went public in June.
When the board declined, according to Riemer, Soon-Shiong approached Ferro and his investment firm, Merrick Ventures.
“The implicit threat was that, if Merrick did not invest in NantHealth, Dr. Soon-Shiong would not invest in Tronc,” Riemer wrote. “Mr. Ferro … told the board that Merrick would make the requested $10-million investment in NantHealth so that Tronc did not have to.”
Riemer concluded by saying: “I understand that since its IPO, NantHealth’s stock price has declined by approximately 66%.”
NantHealth shares priced at $14 apiece in the June 2016 public offering but closed Monday at $5.31, a decline of about 62%.
Riemer said he would respond separately to Soon-Shiong’s demand for corporate records and other documents. Such a request could be a prelude to legal action.
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