USA Today publisher Gannett (GCI) - Get Report laid out its case on Thursday for what Tribune Publishing (TPUB) shareholders stand to lose if they don't block the approval of eight members to the publisher's recently reshuffled board in a vote slated for June 2.
Gannett launched an offer for Tribune on April 25, valuing the firm at $864 million. Gannett said in a statement that Tribune had been holding onto the offer for more than a month "without reply," and noted that rejecting its takeover offer would prevent shareholders from capturing the hefty premium inherent in the bid: The deal values Tribune at $15 a share, representing a 27% premium over Thursday morning trading levels.
Gannett said that the board appears to be "hand-picked" by Tribune's non-executive chairman, Michael Ferro, who became the company's largest shareholder after a $44 million stock purchase via a private, dilutive February exchange. "Gannett urges Tribune stockholders to vote the GOLD proxy card to "WITHHOLD" votes from the election of all eight Tribune directors," said the Gannett statement.
Roughly two thirds of Tribune's board has been reconstituted since Ferro was named non-executive chairman in February. Among the management changes was the appoinment of Justin Dearborn as CEO in late February, replacing Jack Griffin at the helm. The vote will approve the reelection of eight board members that have been added since February -- including Ferro himself.
Tribune also sold $70.5 million of newly issued shares to Patrick Soon-Shiong at $15 a share -- via his firm, Nant Capital -- making the billionaire ex-surgeon Tribune's second-largest shareholder. Soon-Shiong is slated to become Tribune's vice chairman pending the June 2 shareholder vote.
Gannett noted in its Thursday statement that this is the second time this year (following the February purchase of 5.2 million newly issued shares by Ferro) in which Tribune's stock has been diluted by private transactions. Gannett estimates shares were diluted by about 37% by the Ferro and Soon-Shiong deals.
Gannett also also cited a recent letter sent by asset manager Towle to Tribune's board about the offer. Towle holds a more than $16 million stake in Tribune, or 4.2% of Tribune's outstanding shares.
"[S]tacking the Board and ownership in favor of one particular view is not good governance," Towle said. "In fact, your brazen efforts of late have disrupted our belief in fair play."
In response to Towle's letter, a spokesperson for Tribune Publishing said the board "stands ready to work with Gannett to assess whether there is a path forward that will create more value for both sets of shareholders," noting any statements suggesting that Tribune's management is not acting in the best interest of its shareholders "are simply false."
Meanwhile, shareholder advisory firm Glass Lewis said in a Tuesday note that shareholders would be best off approving the board nominees, noting the reconstituted board is "well positioned to fully evaluate and reject any bids that seem particularly opportunistic ... while remaining broadly open to engagement and continuing to press forward with an operational strategy intended to generate more-attractive long-term value for investors in a challenging operational environment."
The board members slated to be confirmed in the June 2 vote include: Carol Crenshaw, Justin Dearborn, David Dibble, Michael Ferro, Philip Franklin, Eddy Hartenstein, Richard Reck and Donald Tang.
Real Money's Carleton English contributed to this report.
Larry Kramer, CEO of TheStreet, serves on the board of directors of Gannett.
This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.