Tronc confirmed this morning that it has sold the Los Angeles Times and San Diego Union-Tribune to biotech billionaire Patrick Soon-Shiong for $500 million plus the assumption of $90 million in pension liabilities.
Because of the healthy sale price and the removal of longstanding friction between management and newly unionized newsroom employees at the Times, Tronc stock shot up 19% for the day to finish at $21.55.
In the official announcement of the deal, Tronc CEO Justin Dearborn emphasized that Soon-Shiong is a Southern California owner committed to high journalistic standards at the two papers he acquires. As far as where the deal leaves Tronc, Dearborn said, “This transaction allows us to fully repay our outstanding debt, significantly lower our pension liabilities and have a substantial cash position following the close of the transaction. We will have a versatile balance sheet that will enable us to be even more aggressive in executing on our growth strategy as a leading player in news and digital media. We have a pipeline of robust opportunities and M&A will continue to be a significant part of our future.”
The company also announced that Times publisher Ross Levinsohn, who taken an unpaid leave of absence due to an investigation into an alleged pattern of sexual misconduct, will leave the paper but shift into a new role overseeing Tronc’s digital portfolio. An independent investigation and report to the board of directors found no evidence of wrongdoing, the company said.
“We are pleased that Ross will be back to work,” Dearborn said. “We have great confidence in him and the team to deliver value for our shareholders through growing digital audiences for our award-winning journalism, new creative content and product initiatives, and growing digital and diversified revenue streams.”
The company noted that the papers accounted for about $470 million in net revenue for the 12-month period ending September 30, 2017, and approximately $73 million of EBITDA, including corporate cost allocation.
The Times itself had reported the advanced talks yesterday after the Washington Post‘s Paul Farhi had broken the news.
Soon-Shiong does not have a media business background. He is a surgeon and the head of a multi-billion-dollar collection of biotech companies. But as an investor in Tronc, he became a notable figure in media circles after calling out Tronc management, especially its controlling shareholder, Michael Ferro, for issues including lavish spending on corporate jets and other perks.
“We look forward to continuing the great tradition of award-winning journalism carried out by the reporters and editors of the Los Angeles Times, the San Diego Union-Tribune and the other California News Group titles,” Soon-Shiong said in a statement.
The ownership change is the latest development in an especially tumultuous period for the L.A. newspaper, the sixth largest in the U.S. For more than a decade, it has experienced a seemingly unending sequence of corporate dysfunction, editorial turnover and dwindling resources. Recent weeks have brought the historic unionization vote, Levinsohn’s leave and the replacement of editor-in-chief Lewis D’Vorkin after a stormy three month tenure. (He has joined Levinsohn in a purely digital role, with former Chicago Sun-Times editor Jim Kirk being named his replacement last week.)
Looming over the operations at the Times and elsewhere in the Tronc fold have been questions about journalistic integrity. Executives have shown an inclination at times toward potentially profitable but questionable tactics such as native advertising and the “contributor model” for building online traffic. All newspapers, of course, face stiff challenges as readers and advertisers completely change their ways in the digital era, but Levinsohn and D’Vorkin provoked the rank and file by promoting tactics seen as dicey. D’Vorkin, insiders have said, also mounted a less-than-robust defense of his editorial team in response to Disney’s boycott of the paper last fall over an investigative series examining the entertainment giant’s ties with the city of Anheim.
Tronc, which was rebranded in an odd shorthand for “Tribune online content” after Tribune Media spun off its collection of print and digital assets from the company’s broadcast holdings, is reliant on newspapers. Its portfolio includes the Chicago Tribune, the Baltimore Sun and the New York Daily News. Its growing digital portfolio includes Cars.com and the Daily Meal.