The rejection of Gannett’s buyout offer for Tribune Publishing sparked another protest from a major investor, saying that the company should have agreed. Two additional advisory firms have however jumped in to give the board a shield against possible lawsuits from shareholders.
St. Louis investment firm Towle & Co., criticized the Tribune’s refusal of Gannett’s offer as a “disturbing development” as it chose instead to name L.A. billionaire Patrick Soon-Shiong as one of its investors in a letter sent Tuesday.
The letter is the second opposition first raised by the company’s third largest shareholder, Oaktree Capital Management. Both protesting shareholders made an implicit threat of filing a lawsuit against the company.
According to the firm’s advisors, the shareholder lawsuit may be difficult to win. The reports published on Tuesday by Glass Lewis and Egan-Jones Ratings Co. showed that Tribune’s board apparently thoroughly looked through Gannett’s offer before they turned it down.
“That the board ultimately arrived at a negative reply in each case does not, on its own, suggest there was an inadequate review of each offer, in our view,” the Glass Lewis report said.
Advisory firm, Institutional Shareholder Services, also released a similar report that echoed the case of the two advisory firms.
Towle’s letter claimed that the owner of the Los Angeles Times newspaper made a “most distasteful’ deal with Nant Capital, Soon-Shiong’s firm, as it reduced the value of shares which Towle and other existing shareholders of Tribune hold. They claim that the board is not concerned about the interests of their shareholders.
Towle had been the fifth largest investor, but the sale to Soon-Shiong for 4.7 million new shares pushed the value of its holdings in Tribune down to only a 4 percent stake ranking sixth in the terms of share size. The deal made Nant Capital, a biotech company, the second largest company enabling him to have a seat on Tribune’s board in the coming month.
“Your brazen efforts of late have disrupted our belief in fair play,” Towle executives wrote. “We now believe your primary interest is self-interest. You have fully demonstrated a lack of concern for the majority of unaffiliated shareholders whom we believe want a fair and reasonable transaction with Gannett.”
The language used by Towle suggests that the firm may be considering suing the board since they are not acting in the interest of shareholders. Oaktree’s letter was also similar in tone and said that the only reasonable action the board could take was to seal the deal with Gannett.
Both Oaktree and Towle questioned Tribune Chairman Michael Ferro and Chief Executive Justin Dearborn’s turnaround strategy which relies on the heavy use of technology.
“The gut-wrenching transformation of newspapers to the digital age is complex and difficult,” Towle wrote. “There is a possibility that you won’t attain your lofty turnaround goals.”
Tribune spokeswoman Dana Meyer said that the Tribune is working on shareholders’ behalf and that any claims otherwise are false.
Dearborn said in a statement that three advisory firms have taken their side sending “a clear message that the board has taken the right approach to protect Tribune shareholders.”
Eagan Jones supported the Tribune by saying that the proposal sent by Gannett is an attempt to disrupt the company’s efforts and strategies toward its transformation.”