The relationship between publisher Tronc and its No. 2 shareholder Patrick Soon-Shiong continued to fray today: In a letter filed with the SEC, the publisher said that Soon-Shiong is engaged in an investment and “media campaign against the company” designed to “coerce” it “into selling [him] the Los Angeles Times. But the LA Times is not for sale.”
Tronc’s lawyer writes that the investor also is trying to “smear” the company to “deflect attention” from his trades in the stock “without first satisfying” its restrictions on insider trading.
This is the latest in a volley of letters as Soon-Shiong’s Nant Capital seeks to increase its stake in the company to 30% and gain access to its records. Tronc dropped Soon-Shiong from the board candidates up for election at the annual meeting in two weeks after he criticized its corporate governance which he says has weighed on its stock price.
Tronc’s proxy says the board decided to reduce its size to seven members from nine.
Soon-Shiong became Tronc’s No. 2 investor, and a board member, last year when he helped the company fight off a hostile takeover offer from Gannett. Tronc issued new stock and sold Soon-Shiong 12.9% of the total shares for $70.5 million — equal to $15 a share. Gannett latter dropped its offer. He had 15.9% of the stock as of last month, when the proxy was filed.
A letter Soon-Shiong’s lawyer sent to Tronc yesterday challenged its “appalling corporate governance.” It says, among other things, that the Board “over Dr. Soon-Shiong’s objections” provided a $2.7 million reimbursement for non-executive Chairman Michael Ferro’s “use of his private aircraft,” bought $250,000 worth of sports tickets from Ferro’s Merrick Capital, and leased real estate from a company with which he’s affiliated.
This is taking place, it said, “while the company is struggling to turn itself around and having to lay off much needed valuable newsroom staff.”
Ferro is Tronc’s biggest shareholder with 24.8% of the votes. The company recently gave him permission to raise his stake to 30%.
In today’s response to Soon-Shiong, Tronc says yesterday’s letter was “filled with misstatements” and “red herrings.”
But the company reasserted its view that its policies bar Soon-Shiong from trading Tronc shares without its permission. It also challenged his “repeated absences from Board meetings” noting that “No other director seems to have had any difficulty joining telephonic Board meetings.”
As for the dealings with Ferro, Tronc says that the board’s Audit Committee knew all about them and they were “fully disclosed in Tronc’s filings with the Securities and Exchange Commission. Mr. Ferro and Tronc have been completely transparent about those transactions.”