As a shareholder lawyer I must admit I love a good stockholder dispute. So I’ve been watching with fascination as the shareholders of the Tribune Publishing Company’s shareholder rise up against the company’s Chairman and board of directors. This story puts “House of Cards” to shame.
In June, a suit was filed by Capital Structures Realty Advisors LLC against Tribune’s Chairman Michael W. Ferro Jr. and the rest of the Tribune board. It claimed Tribune Publishing’s board has failed to do its legal duty to its shareholders by putting up roadblocks to an unsolicited take-over offer by the Gannett Company. The suit sought to block the sale of an almost 13 percent stake in Tribune to Dr. Patrick Soon-Shiong for $15 a share. Ironically, this is the same share price that the Tribune’s board rejected during the takeover offer by Gannett. The suit claimed that the sale to Soon-Shiong was an attempt by the Chairman and the board to keep control. It essentially said that Tribune’s board breached their fiduciary duty by erecting barriers against Gannett Company’s unsolicited takeover attempt with the sale of the stock to Soon-Shiong. Interestingly Capital Structures is one of Tribune’s smaller investors, but they were the ones that filed the 28-page complaint in Delaware.
Here’s how the Wall Street Journal’s Lukas I. Alpert put it in a recent story: “Normally, when a bonafide cash offer from a big company comes knocking at the door, a company’s leadership will open it. The complaint says Ferro has done everything possible to keep it locked tight. Most particularly, the suit challenges Ferro’s recent sale of 4.7 million shares of stock to L.A.’s richest guy, Soon-Shiong, and essentially calls it an above-the-table subterfuge to further consolidate his total control of the company and to further prevent a sale to Gannett…”
Along the way, there have been many twists and turns. Those include an announcement that Tribune Publishing had renamed itself tronc. Yes, tronc. According to a June 2 memo sent to Tribune staff by CEO Justin Dearborn:
“Today, I am pleased to announce another important step in our transformation — the renaming of our Company to tronc, or tribune online content. At our core, we remain a content curation and monetization company focused on creating and distributing premium, verified content across all channels. This rebranding acknowledges our important evolution as a company and captures the essence of our vision for the future.” I’m think this may very well be best described by Alice in Wonderland’s phrase “Curioser and curiouser.”
There were also calls for major stock holders to withhold their votes for the Tribune board during their annual meeting. By Gannett’s count, that resulted in the election of five of eight Tribune directors with less than 50 percent support. This does discount shares voted that were affiliated with Tribune or its Chairman Michael Ferro, but you get the point. Of course, Tribune sees things differently. And, to complicate things further, there is another law suit in the works regards any eventual proceeds of the legal actions.
Where this goes next is anyone’s guess but for those of us who follow these shareholder disputes, it certainly bears watching during the slow business days of summer. And for those of you who want a complete blow-by-blow of this drama, I recommend Ken Doctor’s insightful and humorous account called “Tribune gets Troncked: A reader’s guide to the Tribune/Gannett war”. Happy reading!