Hedge fund reaches a deal to buy Tribune Publishing
By Marc Tracy
In another sign of the financial industry’s increasing influence on the newspaper business, Tribune Publishing, the publisher of nine major metropolitan dailies including The Chicago Tribune and The Daily News in New York, announced Tuesday that it had agreed to give complete ownership of the company to Alden Global Capital, a hedge fund that has drastically cut costs at newspapers it controls.
Alden has pursued full ownership of Tribune Publishing for years and was already a 32% stakeholder in the public company, which dates to the 1847 founding of The Chicago Tribune. On Tuesday, Tribune and Alden said the hedge fund would buy the remaining shares for $17.25 apiece, putting the company’s valuation at $630 million. The companies said they expected to close in the second quarter this year.
The Baltimore Sun, one of Tribune Publishing’s major papers, will not be part of the final arrangement. Under the agreement, it will go to a nonprofit formed by Stewart Bainum Jr., a Maryland hotel executive. Tribune had previously disclosed its talks with Bainum.
Philip G. Franklin, the chairman of the Tribune Publishing board, said in a statement that the agreement with Alden was for “a premium, all-cash price, which the committee concluded was superior to the available alternatives.”
In a separate statement, Alden said: “Our commitment to ensuring the sustainability of robust local journalism is well established, and this is part of that effort.”
The deal still requires approval by the shareholders who own the roughly two-thirds of Tribune Publishing stock not owned by Alden. The largest holder of those shares is Dr. Patrick Soon-Shiong, a medical entrepreneur who with his wife, Michele B. Chan, bought a group of California papers, including The Los Angeles Times and The San Diego Union-Tribune, from Tribune Publishing in 2018 for $500 million. Soon-Shiong owns roughly 25% of Tribune Publishing.
Alden moved closer to its goal of taking over Tribune Publishing in December 2019, when it revealed that it had bought its 32% stake. A year later, it proposed buying the remaining shares for $14.25 each.
The combination of Tribune and MediaNews Group, an Alden-controlled chain of roughly 100 newspapers, including more than 60 dailies, would put another significant chunk of newspaper publishing under the strong influence or outright control of the financial industry.
Gannett, the publisher of USA Today and the nation’s largest newspaper chain, grew to its current size in 2019 when it was acquired by the parent company of GateHouse Media, which was controlled by private equity firm Fortress Investment Group. Although it is no longer controlled by Fortress, Gannett still owes hundreds of millions of dollars to a second private equity company, Apollo Global Management, as a result of the merger.
The newspaper business has struggled for most of the 21st century as the rise of digital media has cut deeply into the revenue once generated by print advertising and newsstand sales. At the same time, Facebook and Google have grabbed a huge chunk of digital ad revenue, effectively blocking the industry from one of its traditional sources of cash.
Roughly a quarter of the newspapers in the United States, most of them weeklies, were shut down between 2004 and 2019, while about 50% of newspaper jobs were eliminated. Hedge funds, however, see newspapers as a potential bargain. With a strict management style that often means job cuts and shrunken coverage of local news, they have been able to squeeze them for profit.
In the process, they have often angered their employees. Journalists at The Denver Post, a daily controlled by an Alden media company, mutinied in 2018 by publishing a special section of opinion essays that blasted the hedge fund, likening its executives to “vulture capitalists.” Earlier, Alden ordered The Post to slash 30 jobs from a newsroom that was down to 100 editorial employees, having already lost a significant number of journalists to layoffs and buyouts since the firm took control in 2010.
Penny Abernathy, a former New York Times and Wall Street Journal executive who studies the economics of local media at the University of North Carolina’s journalism school, said Alden’s track record did not bode well for Tribune Publishing newspapers that may fall under its control.
“Based on the model Alden has used so far, this is contraction of the industry without a significant investment for the future of newspapers,” she said. “One of the problems with these large chains is they’re disconnected, journalistically and economically, from the communities those newspapers serve.”
Some journalists who work for Tribune Publishing papers — which also include The Orlando Sentinel and The Hartford Courant — have tried to persuade wealthy benefactors to step in before the hedge fund was able to gain more shares. Last year, two Chicago Tribune reporters sent letters to Chicago luminaries, urging them to buy the paper.
In an interview Tuesday, Gregory Pratt, the president of the Chicago Tribune’s union and a City Hall reporter, did not seem sanguine about the deal. “This is very bad,” he said. “Not good news. Alden is the worst in the news business, and that is saying something, considering the variety of bad actors out there.
“But we are going to continue to fight for our newsroom and our journalism.” he added. “We aren’t going to just roll over and die because a bad company has gained ownership.”
In Baltimore, where journalists have backed the effort to interest local owners in The Sun, the reaction was more cheerful.
“We’ve campaigned for this for the past year,” said Liz Bowie, an education reporter and a co-chair of the Sun union. About Bainum, she added: “He seems to have the best interests of Baltimore and Maryland at heart. I think the paper will be able to continue to hold the powerful accountable and tell the important stories of our community for another two centuries.”
Bainum did not immediately reply to a request for comment.
Randall D. Smith, a onetime Bear Stearns partner who runs Alden with Heath Freeman, took a seat on the Tribune Publishing board last summer. He was the third executive from Alden or affiliated companies to join the seven-member board.
Like many newspaper chains, Tribune Publishing has struggled. Since Alden took its 32% stake, the company has offered buyouts to employees across the country while trying to stave off the effects of the coronavirus pandemic on an already distressed industry.
Last year, after most newspaper employees had been working remotely for months, Tribune Publishing announced that it had permanently closed the physical newsrooms of The Daily News and many of its other papers.
Tribune Publishing has struggled for more than a decade. The company was taken private by investor Sam Zell in 2007 and filed for bankruptcy the next year. It survived, but in 2010 the chief executive, Randy Michaels, was ousted amid reports of an inappropriate workplace culture.
In 2016, Tribune Publishing’s newspaper arm rebranded itself with a puzzling new name that has since fallen away — Tronc, an abbreviation of “Tribune online content.” Company leadership warred with newsroom employees at The Los Angeles Times until Tribune Publishing offloaded the paper in 2018 to Soon-Shiong and Chan. The same year, Tribune halved the staff of The Daily News, once the nation’s largest-circulation newspaper.