Hedge fund looks to purchase Morning Call’s parent company
New York hedge fund Alden Global Capital wants to buy Tribune Publishing Co., the Chicago newspaper chain that owns The Morning Call and other major titles such as the Chicago Tribune, New York Daily News and Baltimore Sun.
Alden, which owns nearly 32% of Tribune already, submitted a nonbinding proposal Dec. 14 to buy the balance of the company’s stock for $14.25 a share, according to a filing Thursday with the U.S. Securities and Exchange Commission. That price would be more than an 11% premium to Tribune’s closing price of $12.79 on Wednesday, valuing the newspaper company at roughly $520 million.
Alden, which has a history of deep cost-cutting at its 200-publication MediaNews Group, said in the filing it could fully finance the transaction with cash on hand.
“We will have no financing conditions and will not require third-party debt or equity to finance the transaction,” Alden founding member Randall Smith wrote in the nonbinding letter to Tribune’s board of directors, of which he also serves on. “Therefore, we are confident that we can move forward with negotiating definitive documentation for the transaction immediately, with the goal of entering into a binding material definitive agreement within two to three weeks, which we believe would maximize value, speed and certainty for Tribune’s other stockholders.”
News of Alden’s proposal sent Tribune shares up 7%, closing at $13.70 on Thursday.
Tribune spokesperson Max Reinsdorf did not immediately provide a comment Thursday.
The SEC filing states that Alden has not “proposed any specific structure for the transaction nor have they received any feedback” from Tribune. Any deal also would need approval from Tribune’s remaining shareholders, most significantly biotech billionaire Patrick Soon-Shiong.
Soon-Shiong bought the Los Angeles Times and San Diego Union-Tribune from Tribune in 2018 for $500 million and remains Tribune’s second-largest shareholder, with a 24% stake in the company.
Mason Slaine, who has a roughly 8% stake, told the Chicago Tribune in
an email that Alden’s proposed price “seems low.”
Similarly, Douglas Arthur, a research analyst who covers Tribune for Huber Research Partners, called Alden’s offer “significantly too low.” Arthur pointed to Tribune’s large net cash position and suggested something in the $16-$17 per share range is more reasonable.
Tribune, which already had $90 million in cash, netted another $91 million, Arthur said, after completing the $160 million sale of Best Reviews on Thursday. Tribune had a 60% stake in the product-review company.
Much remains unclear in a potential deal, including whether a third entity could be involved.
In its letter, Alden said it had a “brief conversation” on Dec. 11 with Stewart Bainum Jr., the longtime chairman of Maryland-based Choice Hotels International. Bainum, the letter notes, may have an “interest in respect of certain assets of Tribune,” making it worth exploring a transaction involving Bainum, Alden and Tribune.
It’s unclear which assets Bainum is interested in, and he could not be reached to comment Thursday.
Like many publishers, Tribune has seen a sharp drop in advertising revenue — a 48% decrease in the second quarter followed by a 38% drop in the third quarter — amid the coronavirus pandemic and has sought to trim costs. Through cost cuts and digital subscriber growth, Tribune in November reported third-quarter net income of $8.5 million, which was an increase over the same period in 2019.
Alden, for its part, has a history of aggressive cost cuts to boost profits at the newspapers it owns through MediaNews Group, which counts The Denver Post, The Boston Herald and Mercury News in San Jose, California, as titles in its portfolio.
In November 2019, Alden bought into Tribune, acquiring a 25% stake in the company from technology entrepreneur Michael Ferro. The hedge fund has since boosted its position in Tribune to 31.6%.
Often, Alden’s newspapers have looked to shed real estate costs, something that swept through much of the Tribune chain this year.
The Morning Call announced in August that it would permanently vacate its longtime home at 101 N. Sixth St. in downtown Allentown. The newspaper continues to publish, with its roughly 100 employees working from their homes amid the pandemic.
It remains unclear whether Tribune will find another office for The Morning Call once the pandemic ends.
The Morning Call’s presence in Allentown dates to 1883 when a Saturday evening newspaper called The Critic was founded. Following a reader contest, the publication was renamed The Morning Call in 1895.
The newspaper, for the better part of nine decades, remained in the hands of the Miller family. That changed in 1984 when the operation was sold to The Times Mirror Co. for $108 million in cash and notes.
Sixteen years later, Tribune Co. acquired Times Mirror.
By 2014, Tribune spun off its publishing business, and The Morning Call became part of Tribune Publishing.
Two years later, Ferro became the company’s largest shareholder and nonexecutive chairman, eyeing a way to leverage technology to monetize the company’s content. As part of that, Tribune changed its name to Tronc in June 2016, which stood for Tribune Online Content and was quickly ridiculed.
Months after Ferro left the company, Tronc changed its name back to Tribune Publishing in 2018.
Over the years, sale rumors have swirled at the company.
That included an unsuccessful attempt by massive newspaper publisher Gannett to buy the company in 2016. Two years later, Tribune attracted bids from fellow newspaper publisher McClatchy, AIM Media and investment firm Donerail Group. But those bids also were rebuffed.
When Alden bought Ferro out, many surmised the hedge fund would, eventually, angle to combine its MediaNews Group with Tribune.
MediaNews already owns several publications in Pennsylvania. That includes eight daily newspapers, including the Reading Eagle, five weeklies and two niche publications, according to its website.