A Tribune Publishing investor sued the media company's directors and Chairman Michael Ferro for spurning an $864 million buyout offer from Gannett and seeking a cash infusion from a billionaire health-care entrepreneur.
Tribune's board members are seeking to unfairly entrench themselves by taking steps to ward off the $15-a-share bid from Gannett, the largest U.S. newspaper publisher, Capital Structures Realty Advisors said in a complaint made public Thursday in Delaware Chancery Court. The lawsuit was filed on behalf of Tribune and its investors.
The owner of the Los Angeles Times and Chicago Tribune rejected Gannett's second offer on May 23, calling it "clearly inadequate," even though it was 22% more than an earlier $12.25-a-share bid made public in April. Instead, the board adopted anti-takeover measures to wrongfully thwart Gannett's efforts, according to Capital Structures.
Tribune also sold 4.7 million common shares to Patrick Soon-Shiong's Nant Capital for more than $70 million. Mr. Soon-Shiong, a billionaire who started a cancer-research firm, will become Tribune's second-largest shareholder as a result of the deal.
The transaction with Mr. Soon-Shiong "was done for only one purpose, to entrench the board," Capital Structures said in the filing. "Ferro was searching for a like-minded large stockholder to blunt the substantial momentum building behind Gannett's offer and its campaign to urge stockholders to 'withhold' their support for the existing board members at the upcoming annual meeting."
In a statement, Gannett called the lawsuit "further validation that Tribune Publishing's own stockholders believe that the board has shown a disregard for all its stockholders' best interests."
Tribune spokeswoman Dana Meyer said in a statement that stock sales to Merrick Media, where Ferro was chairman and chief executive officer, and Mr. Soon-Shiong's Nant Capital were approved by Tribune's board "and will provide valuable growth capital to allow the company to execute on its new value-creating business plan."
Gannett on Thursday was leaning toward dropping its bid based on expectations that Tribune shareholders would support the current board of directors at today's annual meeting in Los Angeles, according to a person familiar with the matter. Tribune said later all of its nominees were elected, citing preliminary results.
Mr. Soon-Shiong's entry supplants Oaktree Capital Management, which had been Tribune's second-largest investor. Officials of that fund had called for board members to independently evaluate Gannett's offer free from influence by Ferro, a technology entrepreneur who became the media company's largest shareholder in February. Ferro also is the majority shareholder in crosstown rival Chicago Sun-Times newspaper.
Gannett officials have said they will decide whether to continue pursuing Tribune after the Chicago-based company's shareholder meeting. Gannett had urged disgruntled Tribune shareholders to withhold votes for the current eight directors to show their dissatisfaction over their refusal to accept the buyout bid.
Capital Structures wants a judge to hear the case on an expedited basis, to clear the way for Gannett to acquire its target free of the directors' "unreasonable and disproportionate entrenchment maneuvers," according to the suit.
The complaint also names Nant Capital and Mr. Soon-Shiong as defendants because they "knowingly assisted" Tribune's board in actions that weren't in shareholders' best interests. Capital Structures is asking the court to halt the stock sale to Mr. Soon-Shiong.
-- Bloomberg News