As if things hadn't already been messy at Tronc (TRNC) .
Ten months after curiously changing the company's name from the iconic Tribune Publishing and five months after Gannett (GCI) - Get Report pulled an offer to buy the company at a hefty premium, the owner of the Los Angeles Times, Chicago Tribune and other big-city dailies is in the midst of yet another battle for corporate control.
The two people fighting over Tronc are none other than its chairman, Michael Ferro, the company's largest shareholder, and his sometime friend and No. 2 shareholder, Los Angeles biotech billionaire Patrick Soon-Shiong. Ferro on Thursday sought to limit Soon-Shiong's ability to take control of the newspaper publisher when Tribune's board elected to spend $56.2 million to buy out its third-largest shareholder, Oaktree Capital Management.
In doing so, Ferro will rid himself of a critical shareholder and minimize Soon-Shiong's ability to collaborate with other Tronc investors to take control of the company. In a Securities and Exchange Commission filing, Chicago-based Tronc said it had agreed to purchase 3.75 million shares in the company from Oaktree at a price of $15 per share, a 14% premium to the stock's closing price on Wednesday. In the event that Tronc is sold at a higher price than $15 with a year, Oaktree would reap additional funds.
Most importantly, Tronc's board approved a measure to allow Ferro's Merrick Media to raise its stake to as high as 30% from a current level of 24.8%. Soon-Shiong's Nant Capital holds 24% of Tronc.
The horse-trading and corporate jockeying comes nearly five months after Gannett, the country's largest newspaper publisher, pulled its offer to acquire Tronc for $18 a share. Gannett had been stymied in its effort to buy Tronc after Ferro teamed with Soon-Shiong to assert that the company was best served staying with current management.
Shares of Tronc gained 4.2% on Friday to $13.71.
"Ferro is now fighting with his white knight; the guy who helped him thwart Gannett has now emerged as a rival," Cowen & Co. managing director Lance Vitanza said. "There is a certain comic irony to this that it notable."
It remains unclear whether other minority shareholders also will be given the opportunity to sell back their stock to Tronc at $15 per share, the level at which both Ferro and Soon-Shiong previously made bulk purchases from HG Vora. Why, some might ask, should Oaktree and HG Vora receive special treatment compared with other nonmanagement shareholders?
"Shareholders are likely to feel that Ferro is off the rail here. Everyone would have liked to sell the company at $15 a share," Vitanza said. "The fact that Ferro is cherry-picking and saying, 'I'm going to buy these shares at $15, and everyone else is stuck' is not going to leave a good taste in anyone's mouth."
The latest deal between Tronc's chairman and a major shareholder at least demonstrates that some large investors still believe there's value in a legacy print company.
"If nothing else this underscores the intrinsic value that a lot of smart people continue to see in newspapers, and the Tronc assets in particular," Vitanza added. "I'd rather have people fighting to buy the company than fighting to sell it."
A Tronc representative wasn't immediately available for comment.