Investor Advisory Firms Support Tribune Publishing’s Rejection Of Gannett Bid

Associated Press

Here’s the latest blow to Gannett’s $864 million offer to buy Tribune Publishing: Two of the leading investor advisory firms — Glass, Lewis & Co., and Institutional Shareholder Services (ISS) — urge Tribune investors to reject a protest effort that the owner of USA Today has proposed for next week’s annual meeting.

Tribune has rejected the buyout offers. And Gannett wants stock owners to withhold their votes for Tribune’s board at the June 2 meeting. That would have no impact on the outcome — directors are running unopposed.

Still, Gannett says it would “send a clear message” that they want the owner of the Los Angeles Times to talk about the $15 a share offer — which is 99.5% more than Tribune’s trading price before April 25, when Gannett disclosed its initial bid.

But the publisher has “offered insufficient cause” to support the protest, Glass Lewis says in a new report. ISS says Tribune’s rejection of Gannett “is warranted.”

Both note that Gannett made its initial offer in April when Tribune was unusually weak. In March the company fired its auditor, PricewaterhouseCoopers, and CFO after the company found problems with its accounting.

In addition, Tribune had just changed management — investor Michael Ferro bought 16.5% of the shares in February, and installed his colleague Justin Dearborn as CEO. They had not outlined their plans for the company when Gannett made its move.

As a result, Tribune shareholders “have been afforded very little time to fully assess the viability of a strategic pivot,” Glass Lewis says. That’s why it might be better for the board to be “open to engagement” with bidders while “continuing to press forward with an operational strategy intended to generate more attractive long-term value for investors in a challenging operational environment.”

Would Tribune shareholders be better off with a sure thing, Gannett’s $15 a share offer? Perhaps, ISS acknowledges. Tribune’s plan to build the Los Angeles Times and accelerate the company’s digital transformation “might, but has not yet been demonstrated to, solve the challenge of how print media companies can thrive in an online world.”

That’s why it says: “In another year, shareholders are more likely to want to see actual lightning that’s actually been captured in a jar.”

The reports follow Tribune’s efforts to remain independent. This month it adopted a poison pill anti-takeover defense: If someone buys 20% or more of Tribune’s stock then the company would give all other investors the right to double their share of its equity.

And this week it agreed to make Patrick Soon-Shiong’s Nant Capital the No. 2 investor after Ferro with deal offering him 12.9% of the company shares for $70.5 million.

Tribune is trading this afternoon at about $11.92, down about 15% over the last five days as prospects of a sale to Gannett diminished.

Yesterday investment company Towle & Co., which owns 3.9% of Tribune, said in a letter to management that the stock sale to Nant and “brazen” efforts to fight Gannett “have disrupted our belief in fair play.”

The firm fears that “Tribune’s revenues and earnings will decline in coming quarters.” It also believes that most unaffiliated shareholders “want a fair and reasonable transaction with Gannett.”

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