Tronc Moves to Avert Fight With No. 2 Investor for ControlBy
L.A. Times owner repurchases $56.2 million of common stock
Publisher also decides to let chairman boost stake to 30%
Tronc Inc., owner of the Los Angeles Times and Chicago Tribune, moved to gain the upper hand in a boardroom fight with its No. 2 shareholder by agreeing to buy back stock from a large investor and allowing its chairman to boost his stake in the company.
Chicago-based Tronc, one of the biggest U.S. newspaper publishers, bought 3.75 million shares for $15 each from Oaktree Capital Management and affiliates, according to a regulatory filing Thursday. If the media company is sold for more, Oaktree stands to reap additional compensation, the filing said. Tronc also agreed to let Chairman Michael Ferro and his Merrick Ventures LLC increase their maximum stake to 30 percent from 25 percent.
The $56.2 million purchase escalates a dispute with Los Angeles biotech billionaire Patrick Soon-Shiong, who holds about 24 percent of Tronc’s shares and has been adding to his stake since February. The newspaper publisher said earlier this month a board committee decided not to nominate him for re-election as a company director.
“Dr. Soon-Shiong was surprised to learn that Tronc had entered into an amendment allowing Merrick and Michael Ferro to increase their maximum stake,” a spokesman for the investor said in an e-mailed statement.
The biotech entrepreneur “will be writing the company to request his contract also be amended to allow his stake to also be increased to 30 percent from 25 percent. He believes all shareholders should be treated the same.”
The stock buyback cuts Oaktree’s stake in Tronc to zero, according to the filing. It will also complicate any outside investor’s efforts to gain control of the company by boosting Ferro’s holdings and reducing the amount of stock available for purchase.
Tronc directors moved to get Soon-Shiong off the board amid questions about whether he violated company trading policies by acquiring shares near the dates of earnings reports, people familiar with the matter said this week.
Soon-Shiong maintains he and other board members had an agreement that lets them acquire shares as long as they weren’t in possession of material, non-public information, one of the people said. Soon-Shiong has also raised concerns about Ferro’s use of corporate assets, one person said.
Last May, Soon-Shiong’s Nant Capital made a $70.5 million investment in the publisher, a move seen back then as an attempt to fend off a hostile takeover by Gannett Co. Soon-Shiong became vice chairman of the board, and his Nant Capital gained a 13 percent stake.
Soon-Shiong became a billionaire after selling two drug companies he founded. He sold APP Pharmaceuticals Inc., a supplier of drugs given through injections and intravenous drips, to Fresenius SE in 2008 for $4.6 billion. He then started Abraxis BioScience, maker of breast cancer drug Abraxane, and sold the company to Celgene Corp. for $2.9 billion.
The biotech entrepreneur ranks 151st on the Bloomberg Billionaire’s Index with a net worth of $8.6 billion.