Tribune Directors Fail to Gain Majority Vote, Gannett Saysby and
Most shares not held by insiders reject nominees, suitor says
Newspaper publisher changes name to Tronc in rebranding effort
Tribune Publishing Co., the newspaper company fighting an $864 million hostile takeover bid, got a strong message Thursday as a large number of shareholders refused to back management’s board nominees.
The vote could give new momentum to Gannett’s $15-a-share cash buyout offer. Leading up to the annual shareholder meeting Thursday, the publisher of USA Today was leaning toward withdrawing its bid to acquire Chicago-based Tribune, Bloomberg News reported earlier Thursday, citing a person familiar with the matter.
More than half of the shares not held by insiders withheld support for Chairman Michael Ferro, Chief Executive Officer Justin Dearborn and board member Eddy Hartenstein, Gannett said in a statement, citing its proxy solicitor. About 58 percent of the independent shares voting denied support for two other nominees, David Dibble and Philip Franklin. Including Tribune insiders, about 39 percent of shareholders withheld support from the entire slate, exceeding Gannett’s expectations of 25 percent to 35 percent.
“That’s a pretty powerful message the other holders are coming out with,” said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “A good board will have to be responsive. It’s the shareholder’s money.”
Amid all the turmoil, Tribune said late Thursday it’s changing its name to Tronc Inc., or tribune online content, on June 20 to reflect its digital ambitions. As previously announced, Los Angeles billionaire Patrick Soon-Shiong, its second largest stockholder, has become vice chairman and joined the board. Tribune said earlier all of its directors were elected. It plans to release vote totals on Friday.
Gannett, based in McLean, Virginia, had been urging investors to withhold their votes, a moved designed to pressure Tribune management to negotiate. Under Tribune’s bylaws, nominees don’t need an absolute majority of shareholder support to be elected.
That type of arrangement says the board has “complete control over everything and shareholders be damned,” said Donald Schepers, an associate dean at the Zicklin School of Business at Baruch College. “It’s going to be run a certain way regardless of what you think. This is not a democracy.”
In response to Gannett late Thursday, Tribune said all of its directors “were elected by a majority of the votes cast.”
Still, the large number withholding support underscores investor discontent as Tribune’s management fights Gannett’s efforts. Shareholders routinely rubberstamp board elections. Tribune, owner of the Chicago Tribune and Los Angeles Times, has been urged by some investors to hold talks with its hostile suitor.
Gannett has aggressively pursued Tribune’s portfolio of newspapers, which had revenue of $1.67 billion last year. The company made two offers -- one in April for $12.25 a share and a second in May for $15 a share. Gannett would also assume about $385 million in debt.
Tribune’s board rejected both offers as too low and not in shareholders’ best interests. Capital Structures Realty Advisors LLC, a Tribune investor, is suing the media company’s directors for failing to engage with Gannett on its proposal.
Ferro, a newcomer to the media industry, bought shares of Tribune at $8.50 each through his private equity firm Merrick Ventures LLC, becoming the largest shareholder with a 16.6 percent stake. To deflect Gannett, Ferro last month sold enough stock to long-time friend Soon-Shiong, a Los Angeles billionaire, at $15 a share to make Shiong’s Nant Capital the second-largest shareholder, edging out Oaktree Capital Management.
During the 20-minute annual meeting, which was moved to a law office from a hotel, Ferro declined to answer questions from shareholders after David Hardie, president of Hallador Investment Advisors Inc., asked for an explanation of why Tribune rejected Gannett’s bid.
Martin Glotzer, a shareholder from Chicago, urged the board to negotiate with Gannett and asked for an accounting of the value of technology exchanged between Soon-Shiong and Tribune. Ferro told another investor he was “out of order” after he asked repeated questions about the deal.
Besides changing its name, the company will move trading of its shares to the Nasdaq from the New York Stock Exchange and will trade under the symbol TRONC.