Tronc's Latest Fusillade Targeting Soon-Shiong Gets to Core Question

Only one mystery is resolved. We now know what the much-ridiculed Tronc (TRNC) name means: acrimony. 

Tronc re-engaged in a war of words Thursday morning, as it told its now disgruntled, soon-to-be-ex Vice Chairman Patrick Soon-Shiong to put up or shut up in a new letter from its attorney, Yosef Riemer of Kirkland & Ellis. As Tronc's legal counsel launched the new fusillade, addressed to Soon-Shiong's attorneys at Quinn Emanuel, further detailing Soon-Shiong's alleged violation of company policies in buying Tronc shares, they got to the core of the battle: Who will own the Los Angeles Times.

"In conclusion, its seems clear that your client's acquisitions of stock in violation of Tronc's insider trading policy, as well as your media campaign against the company, are all part of your client's strategy to coerce the company into selling your client the Los Angeles Times," Riemer wrote. "But the [paper] is not for sale. As was discussed with your client in December of 2016, the only way for your client to own the LA Times is to acquire the whole company. And if your client wants to make such a proposal, the board will do its duty and consider it."

Were it so easy. As the battle for who owns Tronc's (nee Tribune Publishing) nine metro newspapers, including the Times, Chicago Tribune, Baltimore Sun and Orlando Sentinel, moves into its second year, that endgame of ownership finds itself newly clouded by an array of corporate governance allegations and counterallegations. It's a field day for the attorneys, as "round-tripping," "pre-clearance," "trading windows" and the wider question of "fiduciary responsibility" all populate the press releases and Securities and Exchange Commission filings. 

For the past 10 days, Tronc, led by Chairman Michael Ferro, its largest shareholder, has engaged in a public exchange of allegations with Soon-Shiong, the second-largest shareholder, through their attorneys. That exchange mimics, in vitriolic tone, last year's oh-so-hostile battle as Gannett (GCI) , the country's largest daily newspaper publisher, tried to buy Tronc, the second-largest publicly owned newspaper chain.

This thicket of allegations, one more tangled than last year's with Gannett, likely will serve merely as prologue for a contest for ownership. While Tronc has publicly acknowledged for the first time that it had discussions with Soon-Shiong regarding his interest in buying the Times -- an interest revealed by TheStreet in March -- Ferro clearly has rebuilt the fortifications against any sale.

As previously noted, Soon-Shiong missed a deadline to engage in a 2017 proxy fight. Given that Ferro is set to remove Soon-Shiong both as vice chairman of the company and as a director following Tronc's forthcoming April 18 annual election, and that Ferro more tightly will control the board, which must approve any sale, Soon-Shiong is likely to have to wait until early 2018 to mount a campaign to buy Tronc or the Times

The medical technologist billionaire, of course, could make a public bid at any time, though. After Tronc revealed he would not be nominated for re-election to the board, Soon-Shiong went public with his complaints about Tronc board governance on March 27.  That initiated the sparring letters between Soon-Shiong's attorneys and Tronc's, the latest exchange explained in detail by Anders Keitz at sister publication The Deal.

Are the exchanged letters a prelude to lawsuit? Is a lawsuit a prelude to a buyout offer? Insiders speculate the volley of charges derives more from ego than endgame, but with all things Tronc, bets are tough to make. 

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