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.

James Rufus Koren
May 26, 2016

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.

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.”

To read expanded article, click here.