Deals

Brooke Sutherland is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.

Optics count in contentious takeover battles. And Tribune Publishing's decision to give its CEO a large relocation deal is not a good look.

Just days after rebuffing a 99 percent premium from suitor Gannett, Tribune disclosed on Thursday that it's going to pay Justin Dearborn $262,000 to move to Los Angeles. I mean, I know those tech folks are driving up the cost of living out in California, but come on. It's also not totally clear why Dearborn needs to move to the more expensive state at all when Tribune HQ is going to remain in Chicago and he's going to ferry back and forth to the Windy City.

Dearborn's relocation package works out at about five times the median yearly U.S. household income. It's about double the typical amount for executives, when looking on an annual basis, according to the Bloomberg Pay Index.  

Tribune supposedly needed cash for its revamp strategy badly enough to dilute its shareholders by selling big chunks of stock, not once but twice. It made entrepreneur Michael Ferro its biggest shareholder and chairman in February (at a 40 percent discount to the $15-a-share Gannett is offering) and then made his billionaire friend Patrick Soon-Shiong the second largest this week -- all in the name of growth investment. So what's Tribune doing throwing this kind of money around?

For the cost of that package, you could recruit a few decent reporters -- or hire back some who've been fired. As Dearborn said on his first-quarter conference call, "content is at the core of everything we do." Contentment for senior execs must run it a close second. On top of that $262,000, Dearborn will have his no doubt plush temporary housing and car rental paid for too.

Ill-Will
Tribune shares slumped in part because of Dearborn's relocation package.
Source: Bloomberg
Intraday times are displayed in ET.

It's easy to understand why Tribune shareholders Towle and Oaktree Capital (along with Gannett) accuse management of acting in its own self-interest. Tribune did offer Gannett talks, but only if the suitor signed a non-disclosure agreement allowing Tribune to get a look at its books as well. Gannett has cause to hesitate on that, particularly if it stopped it from soliciting shareholder support.

Ferro has also reportedly been talking about making a bid of his own for Gannett instead. It isn't clear exactly how he would afford this. According to Gannett, Ferro told its executives that he'd only sell to them if he gets "a piece of the action" and that he wanted a "significant role" in the combined company and to be the biggest shareholder.

Tribune says his comments were "grossly mis-characterized and taken out of context." It's hard to say for sure what really happened, but someone at Tribune should have realized this out-sized relocation package would just add fuel to the fire. It's hard to argue you're not being self-interested when feathering a new LA nest.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. This excludes a couple of outliers for big international moves. 

To contact the author of this story:
Brooke Sutherland in New York at bsutherland7@bloomberg.net

To contact the editor responsible for this story:
James Boxell at jboxell@bloomberg.net