Tribune Shareholders Get Their Say (Maybe)

Today may – or may not – bring the resolution of the not-at-all-friendly pissing match between Tribune Publishing chairman Michael Ferro and Gannett Co., which has seen its repeated offers to buy Tribune spurned by the tech billionaire.

Tribune shareholders will finally get their say at a meeting in Los Angeles on Thursday morning, where they can vote to approve or withhold approval for management’s proposed board of directors. Media watchers say it will serve as a de facto “yes” or “no” on the Gannett offer.

But fittingly, even this process might not be so straightforward.

The contretemps between Gannett and Ferro has provided a great deal of entertainment value over the last few weeks, as the normally staid language of corporate transactions rapidly gave way to personal attacks and insults.

This week the invective reached new heights, with Tribune accusing Gannett of “repeated attempts to mislead Tribune shareholders and seize control of the company.” Conversely, Gannett recently claimed that Ferro demanded “a piece of the action” in private talks — implying he sought some sort of additional personal compensation beyond the sale itself.

These attacks and counterattacks have been accompanied by maneuvering on both sides.

Gannett raised its original bid and then took its case directly to Tribune shareholders with an open letter, circumventing the company’s management, which it portrayed as obstructionist and not committed to shareholders’ best interests.

For its part, Tribune has shored up its defenses with the threat of a “poison pill” defense against an outside takeover, which would block the acquisition by issuing new stock to existing shareholders, and also brought on a new investor, Patrick Soon-Shiong, to support the company’s management.

In an ironic twist for a news media company, reporters have been banned from today’s shareholder meeting, doubtless out of fear that events may take an even more acrimonious and unseemly turn — which seems like a reasonable concern.

On paper, at least, Gannett’s offer looks attractive to Tribune shareholders: It is offering $15 per share, for a 29% premium over the current share price of $11.65, and more than double the price of $7.33 before Gannett’s original offer became public.

Shareholders may also respond to arguments from Oaktree Capital Management, one of Tribune’s biggest institutional shareholders, that Ferro’s plans to save Tribune with a digital transformation are vague, untested and unrealistic.

However, today’s vote is not an up-or-down vote on the offer, but merely the composition of the board of directors. Thus, while it will be significant in indicating shareholder sentiments, it will not actually be a binding decision on the acquisition.

If the outcome is indeterminate (or close enough to be interpreted as such), Gannett could respond by raising its bid even further. Alternatively, it could sue Tribune for failing to uphold its duty to maximize shareholder value by giving due consideration to the bid.

In other words, the saga may well continue. Judging by it convoluted progress so far, it probably will.

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