Alden’s investment brings new uncertainty to Tribune Publishing
When Michael Ferro sold his 25.2% ownership stake in Tribune Publishing to New York hedge fund Alden Global Capital on Tuesday, it marked the abrupt end to one of the more tumultuous ownership chapters in the newspaper chain’s long history.
It also ushered in new uncertainty for the publisher of the Chicago Tribune and other major daily newspapers.
Alden, a secretive hedge fund with a reputation for dramatic cost-cutting within its media empire, is now Tribune Publishing’s largest shareholder. It is in negotiations to add two seats to Tribune Publishing’s six-member board.
“They’re not what I would term a passive investor,” said Douglas Arthur, a media industry analyst with Huber Research.
In addition to the Chicago Tribune, Tribune Publishing owns the Baltimore Sun; Hartford Courant; Orlando Sentinel; South Florida’s Sun Sentinel; the New York Daily News; the Capital Gazette in Annapolis, Maryland; The Morning Call in Allentown, Pennsylvania; the Daily Press in Newport News, Virginia; and The Virginian-Pilot in Norfolk, Virginia.
Senate Minority Leader Chuck Schumer, D-N.Y., who has been a vocal critic of Alden’s strategy of acquiring newspapers and cutting staff, issued a statement Wednesday saying he would be watching the hedge fund “like a hawk” in the wake of the Tribune investment.
“Any plans to reduce the size, scope or impact of the New York Daily News, as Alden has done in the past to other prominent newspapers, will be met with fierce resistance,” Schumer said in the statement.
Launched in 2007,
Alden owns about 200 publications through an operating company now known as MediaNews Group, formerly Digital First Media. Holdings include major dailies such as the Denver Post, San Jose Mercury News and the St. Paul Pioneer Press, and smaller weeklies, with many of the newspapers based in California.
The chain has come under fire for sweeping layoffs at its newspapers. The flash point was the March 2018 news that the Denver Post, which Alden has controlled since 2010, was going to lay off 30 employees in a newsroom that had already shrunk from 250 to less than 100 staffers.
The newspaper published an editorial critical of Alden and the editorial page editor subsequently resigned. The layoffs took place as planned.
Lee Ann Colacioppo, 55, editor of the Denver Post for the past three years and a 20-year veteran of the newspaper, said Alden’s actions, while painful, were no different than those of other regional newspaper owners.
“I think these concerns get overblown pretty fast,“Colacioppo said Thursday. “Every newspaper company is having trouble. This is a tough industry.”
While Alden has been downsizing newsrooms, it has continued to aggressively pursue acquisitions.
Earlier this year, Alden made an unsuccessful hostile takeover bid to acquire Gannett, publisher of USA Today and more than 100 other newspapers. On Tuesday, Gannett completed a $1.2 billion merger with GateHouse Media, forming the largest newspaper chain in the U.S.
Alden’s purchase of Ferro’s stake in Tribune Publishing also was announced on Tuesday.
is the last big player standing,” Arthur said. “It’s a very cheap stock and it’s fairly well run.”
Alden representatives did not respond to multiple requests for comment, while Ferro declined to comment.
In an email to employees Friday evening, Tribune Publishing CEO Tim Knight said he has not had conversations with Alden and would not speculate about its plans.
“Our strategic goals, our push to become a digitally focused media company delivering first-rate journalism, and our commitment to serving our communities has not changed or wavered,” the email said. Knight declined a request Friday for further comment.
The relative fiscal health of Tribune Publishing — it is debt-free and still sitting on a pile of cash from last year’s $500 million sale of the Los Angeles Times and San Diego Union-Tribune to biotech billionaire Patrick Soon-Shiong — is something of a departure for Alden, which has traded mostly in bankrupt newspaper companies.
Distressed newspapers have been a plentiful commodity in the last decade, as legacy publishers struggled in the face of digital competition. Newspaper industry revenue has been cut in half between 2008 and 2018 because of a precipitous decline in print advertising, according to data from Pew Research. During that same time, newsroom employment declined 25%.
Alden was founded in 2007 by Randall D. Smith, now 77, who has profited from investing in distressed companies, so-called “vulture investing.”
Heath Freeman, 39, a Duke University graduate and the son of an investment banker who represented unions, joined Alden as president at its inception.
Unlike other media companies, Alden goes out of its way to maintain a low profile. Its website has almost no real information on it, except a photo of sunlight peeking through trees.
Alden became a distressed media investor in 2009, buying stakes in companies that had declared bankruptcy such as MediaNews, Philadelphia Media Network and Journal Register. It also had a stake in Tribune Co., the bankrupt former parent company of Tribune Publishing.
Some of those investments didn’t pan out. In 2010, Alden partnered with investment management firm Angelo Gordon to buy the bankrupt Philadelphia Media Network, parent company of the Philadelphia Inquirer and the Philadelphia Daily News, for $139 million. Two years later, they cut their losses and sold the media properties to a group of local investors for $55 million.
Alden used other such investments to launch its own newspaper company. In 2011, it merged the operations of Journal Register, a small Pennsylvania-based newspaper chain, with Denver-based MediaNews, the formerly bankrupt publisher of the Denver Post and San Jose Mercury News.
It called the new company Digital First Media, and said it was focused on accelerating the transition from print to digital. It became known, however, for aggressive cost-cutting and layoffs.
Between 2012 and 2017, Digital First Media reduced headcount at its newspapers by 52% — twice the national average for the newspaper industry, according to data compiled by the NewsGuild, a union representing employees at Alden-owned newspapers across the country.
The downsizing gained national attention in March 2018, when Digital First Media announced the 30 layoffs at the Denver Post, sparking an editorial page rebellion.
Chuck Plunkett, the editorial page editor of the Denver Post, penned a scathing editorial in April calling Alden “vulture capitalists” and imploring the hedge fund to sell the newspaper.
“Denver deserves a newspaper owner who supports its newsroom,” the editorial said. “If Alden isn’t willing to do good journalism here, it should sell The Post to owners who will.”
Plunkett resigned after Digital First Media executives refused to run another editorial critical of Alden.
Days after announcing the layoffs in Denver, Digital First acquired the Boston Herald, where it laid off about 27% of the staff immediately after closing the deal, according to the rival Boston Globe.
Shortly afterward, Digital First brought back the MediaNews brand for its newspaper operation.
In Denver, Colacioppo said the downsizing has stopped.
“In the newsroom, we haven’t had any staff reductions from the ones that got so much attention a while back, and we’ve been filling all our openings, which not many newspapers can say,” Colacioppo said. She declined to say how many staffers are in the Post’s newsroom.
“This newsroom is empowered to write the stories that we want to write, to make the choices we want to make about our coverage,” she said. “Nothing is off limits to us, and that’s probably the biggest thing I’d want to say about being owned by Alden, and I’m grateful to have that kind of freedom.”
In recent months, questions have been raised about Alden’s management of its newspaper employees’ pensions.
Last year, Solus Alternative Asset Management, the largest minority shareholder in MediaNews Group, filed a lawsuit against the company alleging it diverted hundreds of millions of dollars from its newspapers into unrelated Alden ventures, including $248.5 million of pension assets invested in Alden funds.
In April, a spokesman for Alden Global Capital confirmed to the Washington Post that it was being investigated by the Labor Department after moving the pension accounts to its own funds. A spokesman for
MediaGroup News also confirmed the investigation to the Washington Post but denied any violations of federal law.
Alden’s purchase of Tribune Publishing’s 25.2% stake ended Ferro’s tumultuous time at the company.
For much of his tenure, Ferro was engaged in negotiations with various suitors to sell his shares, or the entire company. In 2016, Gannett sought to buy the company but its financing fell through.
A deal by Ferro to sell his stake in Tribune Publishing to an investor group fell through in June 2018. Last December, Tribune ended talks to sell the company to McClatchy, rejecting an offer of $16.50 per share, which included $15 in cash and $1.50 in McClatchy stock, according to insiders familiar with the proposed deal.
Tribune Publishing is in much better financial shape than either Gannett or McClatchy in the wake of its 2018 sale of Los Angeles Times and San Diego
Union-Tribune to SoonShiong. The company is essentially debt-free and had $56.5 million in unrestricted cash as of Sept. 29, according to its third-quarter earnings report.
In July, Tribune paid a special cash dividend of $56 million to shareholders. Ferro, received about $13.6 million while Soon-Shiong, Tribune’s second-largest shareholder, received about $13.1 million.
On Nov. 14, Tribune announced it was instituting a 25-cent quarterly dividend to shareholders, with an initial payout of about $9 million due on Dec. 10. The first dividend will be payable to shareholders of record as of Nov. 25, which means Alden will get Ferro’s $2.25 million payment.
Some industry analysts believe Alden will seek to grow its stake in Tribune Publishing, perhaps through the acquisition of Soon-Shiong’s 8.7 million shares, which represents 24.4% of the company.
Soon-Shiong did not respond to a request for com “Tribune ment.
Alden’s stock purchase, the Gannett-GateHouse megamerger and recent financial warnings from McClatchy marked a week of uncertainty across the newspaper industry.
The Chicago Tribune Guild, the union that represents newsroom employees and is in contract negotiations with Tribune Publishing, issued a statement reflecting those concerns.
“Alden has a well-established history of harming media institutions and journalists,” the Guild said Tuesday. “Still, no matter who owns these shares, we promise to fight as hard as we can to protect our members, improve our company and serve our readers.”
Media analyst Arthur said Alden has become a modern-day newspaper baron for one reason: return on investment.
“They are a deep value investor — they’re in it for the money,” Arthur said. “I wouldn’t call them longterm thinkers about the future of journalism.”