Tronc Inc., the publisher of the Chicago Tribune and Los Angeles Times, is buying the shares of Oaktree Capital, its third-largest shareholder as its largest shareholder feuds with its second-largest.
Lynn Marek of Crain’s Chicago Business had the news:
Tronc, formerly known as Tribune Publishing, agreed to buy Oaktree’s approximately 13 percent ownership stake, or 3.75 million shares, at $15 a share, according regulatory filings by both companies today. As part of the agreement, which gave Oaktree about an 11 percent premium on shares that traded near $13.50 in the past two days, they also agreed not to make any legal claims against each other in the future.
The accord allows Tronc to get rid of a disgruntled shareholder, and ends a long investment saga for Oaktree, which was the biggest shareholder after the publisher emerged from four years of bankruptcy in 2013. As a creditor in the bankruptcy, Oaktree aimed to turn its IOUs into public shareholder gains after the company went public, but its effort lasted longer than expected and turned into a battle with the company.
Last year, Oaktree urged Tronc to reconsider its rejection of an acquisition offer by larger rival Gannett, before the $1 billion deal ultimately fell apart on a lack of financing. At one point, Oaktree demanded documents from Tronc and threatened legal action against the company.
The buyback comes as Tronc Chairman Michael Ferro and his Merrick Media co-investors, who are the largest owners, face another potential shareholder challenge from Vice Chairman Patrick Soon-Shiong, who has been building his ownership stake, including with a recent purchase from Oaktree.
Annlee Ellingson of the Los Angeles Business Journal reported about Soon-Shiong’s interest:
Under the agreement, Oaktree will receive additional funds if the media company undergoes a change of control at a higher rate.
That seems possible, as the company’s second-largest shareholder, Los Angeles billionaire Patrick Soon-Shiong, appears to have made a play for tronc this week, buying 2 million shares at $15 each in a deal that brings him within 1 percent of majority shareholder and Non-Executive Chairman Michael Ferro.
Soon-Shiong’s stock purchase comes on the heels of tronc announcing that it will be reducing the size of its board from nine members to seven at its next stockholders meeting on April 18, removing Soon-Shiong and Donald Tang from its ranks.
But Soon-Shiong’s move suggests that he will not go quietly and may be angling to take over the company.
In addition, today’s deal includes the caveats that Oaktree may not buy additional stock in tronc nor attempt to influence the buying or selling of shares for two years.
Robert Channick of the Chicago Tribune reports Tronc spent $56 million to buy Oaktree’s shares:
Ferro owns 9.05 million shares. Because it reduced the number of outstanding shares, the Oaktree buyback raised his stake in Tronc to 27.7 percent from 24.8 percent.
Tronc’s second-largest shareholder and board Vice Chairman Dr. Patrick Soon-Shiong, who will lose his seat next month, was closing the gap with Ferro after buying 2.95 million shares of the company’s stock in separate transactions Monday. He bought 2 million shares from New York hedge fund HG Vora, at $15 a share, or $30 million, and 950,000 shares from Oaktree priced at $14.60, or about $13.9 million, according to an SEC filing Tuesday.
As a result of Tronc’s stock buyback from Oaktree, Soon-Shiong’s 8.74 million shares account for 26.7 percent of outstanding shares, up from 24 percent.
Ferro and Soon-Shiong were each limited to a 25 percent ownership stake under the terms of their initial purchase agreements.
