by Brooke Sutherland
So this is how it ends. Tribune Publishing Co., the storied newspaper owner, agreed to sell itself to Alden Global Capital LLC, a hedge fund with a reputation for gutting newsrooms with cost cuts, at a valuation of $630 million.
The news came almost five years to the day after technology investor Michael Ferro bought a large stake in Tribune, became its chairman and unleashed a torrent of drama. If you look just at the starting and closing stock prices of Tribune over that period, this result for the owner of the Chicago Tribune and New York Daily News might seem like a relative success. Ferro bought his shares for $8.50 a piece, sold his stake to Alden in late 2019 for $13 and now the hedge fund is offering $17.25 for Tribune’s remaining shares outstanding. All in, the stock has appreciated about 90% for those patient enough to hold on through these past five years. But the word “patient” doesn’t really do justice to this tumultuous period.
Ferro’s tenure included a prolonged hostile takeover battle with Gannett Co. in 2016 that ended with the buyer walking away. Gannett’s last public offer was for $15 a share but it reportedly contemplated a bid as rich as $18.75. For a brief unfortunate period, the company called itself Tronc. A plan to reinvent the news business by incorporating machine-learning video technology and “content-harvesting robots” yielded little beyond an embarrassing promotional video that became the butt of many online jokes. The company also had a public falling out with its No. 2 shareholder, Patrick Soon-Shiong. The biotechnology investor was ousted from Tribune’s board in 2017 but retained his stake and later purchased the Los Angeles Times for $500 million.
Ferro stepped down as Tribune’s chairman in 2018, mere hours before Fortune published a detailed story of sexual harassment allegations against him. In 2019, he sold his stake to Alden, setting up the hedge fund up to accumulate board seats and eventually launch this takeover offer.
So was it all worth it? From investors’ point of view, Tribune’s share performance lags that of the Russell 2000 Index. Its gain is less than half that of the New York Times Co. over the past five years. But Gannett has tumbled about 70% over the same stretch. So it could have been worse.
From the Tribune journalists’ point of view, as I remarked in 2019 when Ferro sold his stake, things may not have ended much differently for them even if the company hadn’t had such a colorful journey these past five years. Dwindling advertising dollars and the challenges of cultivating a money-generating digital strategy have forced most newspaper companies to scale back — unless they’re lucky enough to draw the backing of a benevolent billionaire. Perhaps Gannett would have pulled off its takeover of Tribune, but it, too, was no stranger to cost cuts. Gannett, owner of USA Today, was targeted by Alden as well before eventually merging with New Media Investment Group Inc. and making, yes, more cost cuts. But as my colleague Joe Nocera has documented, Alden is particularly ruthless when it comes to culling jobs and appears more interested in bleeding these newspapers dry than turning them around.
The winners here, to the extent that there are any, are the employees of one-time Tribune mastheads, the LA Times and The Baltimore Sun. Things haven’t gone perfectly at the LA Times since Soon-Shiong’s takeover; the newspaper has faced criticism from its staff over a lack of diversity in its ranks, culture clashes with new hires and alleged ethical lapses. But at least the paper appears to have broken free from a cycle of perpetual cost cuts. The Baltimore Sun, meanwhile, is set to be carved out of Tribune and sold separately to Sunlight for All Institute, a nonprofit formed by real estate investor Stewart Bainum Jr. Who knows what the future holds for those publications; newspapers are still a tough business. But an investor whose operating strategy doesn’t consist entirely of cutting costs has a chance of turning out news articles worth reading.
There’s a small chance this long Tribune saga has another chapter and that there could be yet more journalistic winners. Alden needs two-thirds of other Tribune shareholders to back its bid. Soon-Shiong still holds a 24% stake, which gives him the power to block a deal if he chooses, as documented by Poynter. Mason Slaine, former CEO of business information publisher Thomson Financial, owns about 8%. He told the Chicago Tribune last year that he had previously approached Ferro about buying his hometown newspaper, the South Florida Sun Sentinel, but the former chairman refused. Perhaps the paper might feel differently today.
Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.
