Tribune announces Alden has successfully taken over, but the intentions of the man whose vote counts most remain unclear
By Julie Reynolds
Tribune Publishing officials said Friday that shareholders quickly voted to approve a takeover of the storied newspaper chain by hedge fund Alden Global Capital, known as the “destroyer of newspapers.”
Thirteen Tribune NewsGuild units issued a joint press release decrying the merger, which will take Tribune Publishing private and likely into deep debt.
“Today, Tribune Publishing shareholders voted to put profit and greed over local news in our Country,” the statement reads. “While we are saddened by the turn of events, we know that our work over the past year — to build allies in the community and to raise awareness about Alden — is not in vain. Those allies will support us as we fight against Alden to protect local news and the cuts that they will inevitably try to make.”
It was signed by various union units at the Baltimore Sun, Chicago Tribune, Hartford Courant, Orlando Sentinel and other papers that have sought to find local owners to buy their papers before Alden took over.
Abstention or a ‘yes’ vote?
Yet as soon as the news broke, the voting process to approve the deal came into question.
The merger required approval by a two-thirds majority of non-Alden shareholders. That meant the key vote fell to Dr. Patrick Soon-Shiong, the billionaire surgeon and LA Times owner who held 24% of Tribune shares. Soon-Shiong issued a statement through a spokesperson Friday morning saying he had “abstained” from voting.
But according to Tribune’s proxy statement to shareholders about the vote, an abstention should have counted as a “no” vote. The same proxy also said an affirmative vote from Soon-Shiong was necessary for the merger to go through: “Patrick Soon-Shiong’s vote in favor of the transaction is required, based on his current ownership of the common stock.”
The @dfmworkers Twitter account quickly set off a tweetstorm when it quoted the SEC filings.
Then, after The NewsGuild raised the issue, Tribune responded by telling NPR’s David Folkenflik that Soon-Shiong had actually not checked any voting preference — the only choices were “for,” “against,” or “abstain” — but that his blank ballot counted as a “for” vote. Language in the voting materials for investors appears to allow this, at least for mail-in ballots.
Soon-Shiong, however, apparently did not mail his ballot — he told the Washington Post earlier this week that he was still undecided and would vote Friday, with the Post adding, “he only recently realized that the shareholder vote to determine the future of the company” was days away.
Assuming Soon-Shiong knew that leaving all boxes blank would count in Alden’s favor, the question now is why did he claim he abstained — a choice that would have led to an entirely different outcome?
What, in fact, were his true intentions?
Folkenflik later revised his report, saying Soon-Shiong “chose not to vote, according to two sources with knowledge.”
Yet if Soon-Shiong did not vote, it should count as a “no.”
“For purposes of the Merger Proposal,” the proxy states, “if you fail to submit a proxy or vote virtually at the Special Meeting, or abstain, or you do not provide your bank, brokerage firm or other nominee with instructions, as applicable, this will have the same effect as a vote ‘AGAINST’ approval of the Merger Proposal.”
Finally, after the Washington Post reported on the voting controversy, Folkenflik responded on Twitter: “To be clear: I’m told that Soon-Shiong decided to allow Alden bid for Tribune to succeed, despite all of today’s confusion. The sale was the result he intended.”
Requests for clarification sent to Soon-Shiong’s spokesperson did not get a response.
Debt and deep cuts looming
NewsGuild president Jon Schleuss issued a statement Friday saying he reached out to Tribune and people close to Soon-Shiong asking for an explanation. Tribune only referred him to a Chicago Tribune story that said the company’s officials “confirmed that proxy ballots registered to Soon-Shiong had been submitted without the ‘abstain’ box being checked, and those votes were tallied as a ‘yes’ vote.”
Schleuss said approval of Alden’s bid of $17.25 per share “represents a short-sighted view of the value of the company, and an utter disregard for the value of quality news coverage.”
Referring to efforts by several billionaires who attempted to offer a higher bid, Schleuss wrote, “Civic-minded investors pledged millions to return Tribune papers to local ownership, and to focus on public good over profits.”
Although the deal appears to be moving forward, several shareholder lawsuits have been filed seeking injunctions to halt the merger.
Barring successful legal challenges, the approval means Tribune is likely to go deep into debt. Alden has said it can buy Tribune Publishing with surplus cash on hand, but as dfmworkers.org first reported, the former New York hedge fund’s merger agreement with Tribune appears to contradict the claim.
The fine print shows that Alden is now likely to force Tribune to borrow hundreds of millions to pay for its own takeover. The largely debt-free Tribune could take on $375 million in loans just so Alden can take it private — and then extract as much cash as possible.
Securities and Exchange Commission filings show Alden recently dumped its other publicly traded shares in other media companies, specifically the Lee and Gannett newspaper chains and Sinclair broadcasting. It remains heavily invested in coal, oil and gambling concerns, in contrast to president Heath Freeman’s claim Friday that Alden’s takeover of Tribune “reaffirms our commitment to the newspaper industry.”
Three Alden associates, including the hedge fund’s co-founder Randall Smith, are on Tribune’s seven-member board. Only board member and Tribune CEO Terry Jimenez voted against the Alden deal.
Journalists vow to keep fighting
Journalists have broken their traditional silence about their own industry and “organized rallies, gotten support from their communities, found local investors and fought back.”
“No one knew who Alden Global Capital was before NewsGuild members shined a light on their practices,” Schleuss said. And union members at Tribune papers who’ve been trying to find local owners said they will continue those efforts.
“We will continue to do our very best for our readers and our communities,” said Chicago Tribune columnist Rex Huppke. “And we will fight like hell, and as one, against anyone who puts dollar signs above democracy. Because, at the end of the day, this is what we do… I cling naively to hope and the belief that good might prevail.”