Tribune CEO Terry Jimenez was lone voice voting against Alden takeover
By Julie Reynolds
Alden Global Capital is aggressively undermining an effort by a Maryland hotel magnate to buy Tribune Publishing and possibly make its papers nonprofit charities, a new government filing reveals.
Investor Stewart Bainum Jr., who owns the Choice Hotels chain, offered $46 million more than Alden is offering under its current acquisition proposal, a proxy statement filed Tuesday showed. At $18.50 per share, that’s a 7% increase over Alden’s $17.25-a-share bid.
As of Wednesday, Alden’s offer was below the stock’s $17.48 trading price.
Yet Tribune’s seven-member board — three of whom are Alden-affiliated — won’t even consider Bainum’s offer — mainly because Alden won’t go for it.
In the statement, filed with the Securities and Exchange Commission, the board declined to consider Bainum’s offer because “Alden had made it clear it would not support an alternative transaction.” Bainum had already begun negotiating with Alden/Tribune to buy the Baltimore Sun plus two other papers and make them nonprofit. As reported by the Washington Post, when Bainum learned Alden suddenly wanted him to pay Alden management fees for five years (starting at $12 million for the first year), he apparently concluded Alden wasn’t serious about selling.
And so he decided he should try to buy the whole Tribune chain.
The board said it thought Bainum did not yet have financing in place for the purchase, though it did indicate it might wait until the end of March, when Bainum said he had a good chance of securing the needed funds.
Concerns mount about Alden’s offer
Even as it resolutely proceeds with Alden’s takeover effort, the board acknowledged there were significant downsides to digging in its heels for Alden.
One was that Bainum had only recently been allowed to see company financial statements so he could speak with potential investors. The board noted that Bainum indicated in a March 16 letter that “he expects to be able to complete due diligence and negotiate a definitive acquisition agreement within two weeks after full access to necessary information, and that he believes that there will be significant interest among financing sources in joining his effort.”
Yet the board went ahead with a recommendation to shareholders to support the Alden proposal anyway.
Only Tribune’s CEO and board member Terry Jimenez voted against the sale to Alden, believing “the price proposed by Alden was inadequate due to his greater optimism about the Company’s future financial performance, and therefore, when comparing Alden’s offer, he considered remaining as a standalone company to be in the best interests of the Company and its stockholders,” the proxy statement said.
That Jimenez may be risking his job by taking a stand against Alden is telling.
Forging ahead with Alden could potentially expose Tribune to litigation from shareholders for refusing to accept Bainum’s higher offer.
Tribune has already faced litigation over the “poison pill” it enacted last year to discourage takeover attempts from other bidders besides Alden (that case settled earlier this year). At least one shareholder law firm has been investigating Alden’s offer and “possible breaches of fiduciary duty and other violations of law by the board of directors of Tribune Publishing Company,” even before news of Bainum’s higher bid surfaced.
The board also indicated it should sell to Alden because Tribune’s “directors, senior management and other employees will have expended extensive time and effort and will have experienced significant distractions from their work” while negotiating with Alden. But three of those directors are affiliated with Alden, so this “time and effort” was actually for their own benefit.
It’s been clear since it first began buying Tribune stock that Alden maneuvered its way onto the company’s board to pave the way for this takeover. An internal company presentation last summer at Alden’s MNG newspaper chain included a slide that said: “Tribune relationship deepening with (Alden co-founder) Randy Smith on their board,” and that “Greater ownership could happen as soon as Jan 1,” and, finally, “Pushing our strategies closer together.”
Alden has followed this playbook for years with other companies: buying its way onto their boards, then driving them into bankruptcy — while along the way, setting up insider deals that benefit Alden.
After Alden got control of the boards of Fred’s Pharmacies and Payless ShoeSource, it quietly moved those companies’ headquarters from Memphis and Topeka to a Texas building owned by Alden co-founder Randy Smith, a fact even employees didn’t know about until reporters uncovered it. Turns out, the new renters arrived just in time to bail out Smith, who had lost a major tenant and had a $62 million loan coming due.
Will Alden load Tribune with debt?
Another concern is Alden’s own ability to finance the deal, a fact Tribune’s Alden-loving board seems oblivious to. Alden hasn’t made clear where it will get the $375 million it needs to complete the deal, assuming it still sells the Maryland papers to Bainum for $65 million.
Alden may be in a tough position: its staffing and assets under management have declined substantially in recent years, the latter shrinking from more than $2 billion in 2016 to less than $765 million last year, according to filings with the Securities and Exchange Commission. (Curiously, just last week, Alden terminated its registration with the SEC, so these numbers will no longer be available.)
Is it possible Alden doesn’t have enough cash to compete in a bidding war with Bainum?
Reading the proxy statement’s fine print, it seems likely. In fact — in a Faustian arrangement — it’s feasible that Tribune will end up taking on debt to help Alden buy it.
That’s right: the proxy says Tribune “has the right” to finance the $375 million Alden needs “with the proceeds from debt and/or equity financing.” At the moment, Tribune is a rarity among newspaper chains, with little debt on its balance sheet.
Stewart Bainum made an $18.50 a share offer for Tribune Publishing, more than Alden’s offer, but the Tribune board is recommending shareholders approve Alden’s bid anyway. https://t.co/Ch9FalwjW4
— Scott Dance ☀️ (@ssdance) March 24, 2021
“This hedge fund has Tribune Publishing by the throat,” wrote Scott Dance, a NewsGuild leader at the Baltimore Sun, on Twitter.
As Dance notes, the SEC filing shows that another bidder has made an offer to buy the Allentown Morning Call from Tribune for around $30-$40 million, but the terms of the company’s agreement with Alden also stopped that purchase in its tracks.