Tribune Publishing releases details of bids in SEC filing
A Maryland businessman has offered $650 million to purchase all of Tribune Publishing Co., the parent of The Baltimore Sun, but the Chicago-based newspaper company’s board endorsed a $630 million offer from Alden Global Capital.
Even as Tribune Publishing’s board of directors recommended shareholders approve Alden’s deal to buy the company for $17.25 a share, it gave Stewart Bainum Jr. the green light to pursue financing for his bid of $18.50 a share.
The details of the competing offers for Tribune Publishing from the New York hedge fund and the Maryland hotel executive, who wants to buy The Sun and turn it into a nonprofit, were disclosed in documents filed late Tuesday with the U.S. Securities and Exchange Commission.
Shares of Tribune Publishing rose as high as $17.58 a share Wednesday morning on news of Bainum’s offer, but settled to close at $17.28 each, up just 22 cents for the day.
Bainum, the chairman of Maryland-based Choice Hotels International, initially had a nonbinding agreement to buy Baltimore Sun Media for $65 million upon Alden’s acquisition of Tribune Publishing. But negotiations over the terms of a transition services agreement faltered.
Bainum subsequently made his bid for the whole company on March 16, Tribune Publishing said in the SEC filing. In addition to Baltimore Sun Media, which includes the Capital Gazette in Annapolis, Carroll County Times in Westminster and other local publications, Tribune Publishing owns the Chicago Tribune; the Hartford (Connecticut) Courant; the Orlando (Florida) Sentinel; the South Florida Sun Sentinel; the New York Daily News; The Morning Call in Allentown, Pennsylvania; the Daily Press in Newport News, Virginia; and The Virginian-Pilot in Norfolk, Virginia.
Bainum committed $100 million but needs additional financing for the proposed $650 million acquisition, according to the filing. He told the board “there would be significant interest among financing sources in joining his effort,” the filing stated.
A three-member special committee of Tribune Publishing’s board, which has been vetting the Alden offer, agreed Friday to “grant a waiver of certain restrictions” to allow Bainum to pursue financing for the larger bid, according to the filing.
The full board, however, voted Feb. 15 to endorse the deal with Alden, already Tribune Publishing’s largest shareholder with a 31.6% stake. The deal, which the company said should close in the second quarter, requires approval from federal regulators and two-thirds of Tribune Publishing’s other shareholders in a proxy vote to be scheduled.
Tribune Publishing’s board is not changing its recommendation because, among other reasons, Bainum still needs to secure financing and is only willing to put up $100 million himself, according to the SEC filing. The document also cited a $20 million breakup fee Tribune Publishing must pay Alden if the deal doesn’t go through.
Tribune Publishing said in the SEC filing that “Alden had made it clear it would not support an alternative transaction.”
Tim Ragones, a spokesman for the Tribune Publishing special committee, declined to comment Tuesday evening. A spokesman for Alden did not respond to requests for comment.
A representative of Bainum said they passed along a request for comment, but there was no other response.
It’s unclear from the SEC documents whether Bainum remains interested in buying just The Sun if he cannot purchase the whole company or whether he and Alden still can strike a deal for the Baltimore properties. According to the filing, Alden told the board that it continues to negotiate with Bainum regarding the sale of The Sun.
The documents still say Tribune Publishing expects Baltimore Sun Media to be sold to the Sunlight for All Institute, a nonprofit foundation established by Bainum, though such a sale is not guaranteed.
Karyl Leggio, a finance professor at Loyola University Maryland, said she believes Bainum remains focused on buying The Sun and is trying to get Alden to negotiate better terms for that deal.
“In all likelihood, what he wants is The Baltimore Sun on his terms,” said Leggio, adding that such a deal would be very good
for Baltimore to shore up and preserve local news reporting.
She thinks it could be in Alden’s interest to come to terms with Bainum if only to make him go away with his higher offer for all of Tribune Publishing.
Alden owns or has stakes in about 200 U.S. newspapers through Media News Group, which it controls. With its investment in Tribune Publishing, Alden has three of seven seats on the company’s board. Its representatives recused themselves during the vote to recommend shareholders approve the hedge fund’s offer.
Tribune Publishing CEO Terry Jimenez was the sole dissenting vote, according to the SEC filing. Jimenez called the price proposed by Alden “inadequate,” and said he considered “remaining as a stand-alone company in the best interests of the company and its stockholders,” the filing said.
The deal’s success hinges on securing the votes of California biotech billionaire and Los Angeles Times owner Patrick SoonShiong, who owns 24.6% of Tribune Publishing. Soon-Shiong has not spoken publicly about Alden’s bid or his intentions. SoonShiong, who built his initial stake in Tribune Publishing at $15 per share in 2016, owns about 8.7 million shares of the company.
Through a spokeswoman, Soon-Shiong declined to comment Tuesday evening.
The SEC filing also revealed that Alden has sought since late 2019 to increase its stake in Tribune Publishing or buy the company outright. It also showed that there have been other bidders in the mix for either the whole company or pieces of it.
On Feb. 7, 2020, another party expressed interest in a potential acquisition of Baltimore
Sun Media for $25 million. That aligns with reports last year that local philanthropists, including the Abell Foundation and Goldseker Foundation, had approached Tribune Publishing about acquiring The Sun.
While Tribune Publishing entered a confidentiality agreement with that party, they ultimately “agreed not to proceed due to the wide gap in valuation expectations between the parties,” according to the filing.
An Abell spokeswoman said in an email the foundation has signed a nondisclosure agreement and cannot comment. Matt Gallagher, president of the Goldseker Foundation, did not respond to an email seeking comment.
Another party expressed interest in the Hartford Courant in July, but the parties were unable to agree on a confidentiality agreement to pursue talks.
After Alden’s initial $14.25 per share bid for the company in December, an unidentified bidder submitted a nonbinding proposal to buy Tribune Publishing for $15 a share on Jan. 13. The special committee went back to Alden with an $18.25-per-share counterproposal in the wake of the third-party bid, according to the filing.
Tribune Publishing’s investment adviser, the New York firm Lazard Freres, subsequently determined there was “a gap in equity financing” for the $15-per-share third-party bid.
On March 10, Tribune Publishing received an offer from another unidentified bidder to buy the Morning Call Media Group for $30 million to $40 million, according to the filing. Tribune Publishing said it is restricted by the merger agreement from “pursuing these indications of interest,” and referred the inquiry to Alden. Days later, Bainum submitted his offer and the special committee agreed to let him pursue financing.
Bainum may be trying to piece together a group of interested local parties to pool resources to buy Tribune Publishing and take the local newspapers and turn them into nonprofits, Loyola’s Leggio said. But that’s a big ask, she said, citing the lack of success of an effort in Chicago to find an investor there to buy the Chicago Tribune.
“Newspapers in general are not an easy investment vehicle right now,” Leggio said. “But Bainum has a nice network, so it’s possible for him to put together an investment group.”
Leggio also suggested the deal could face increased regulatory scrutiny.
“There is no guarantee this will go through,” Leggio said of Alden’s deal, citing the high level of consolidation in the newspaper industry.