May 23--Los Angeles Times owner Tribune Publishing Co. has rejected a second buyout offer from rival newspaper publisher Gannett Co., and this time it's brought in new financial muscle to fend off further overtures: L.A. billionaire Patrick Soon-Shiong.
Tribune Publishing announced Monday morning that it has sold 4.7 million shares of newly issued stock to Soon-Shiong's Nant Capital for $70.5 million, and that Soon-Shiong will join Tribune Publishing's board as vice chairman.
The move not only gives Tribune Publishing an influx of cash, it also makes Soon-Shiong the company's second-largest shareholder, edging out L.A.'s Oaktree Capital Management, which has been pushing Tribune to accept a deal from Gannett.
Soon-Shiong bought in at $15 a share, the same price at which Gannett had most recently offered to buy all of Tribune Publishing.
Gannett said Monday it would consider dropping its bid, though the Virginia-based newspaper giant said it will continue its campaign to ask Tribune Publishing shareholders to voice disapproval about the board's handling of the buyout offer.
Gannett said it would review whether to proceed with its offer following Tribune Publishing's June 2 shareholder meeting, but Soon-Shiong's investment could kill the proposed buyout, at least for now, said analyst Hamed Khorsand of BWS Financial.
The investment increases the amount Gannett would likely have to pay for Tribune, and the deal means that nearly 30% of Tribune shares are held by Ferro and Soon-Shiong, who don't favor the sale.
"The best they can do is accumulate stock in the open market, then wage another war in a year," Khorsand said. "That's all they can do."
In a statement announcing the deal, Soon-Shiong and Tribune Publishing Chief Executive Justin Dearborn said the investment will help the company implement a technology-heavy strategy, pushed by Dearborn and Tribune Chairman Michael Ferro to help increase the publishing company's online revenue.
"All industries go through cycles and Tribune, recognizing the vital role of technology in the future of publishing, is transitioning from a legacy newspaper company to a technology and content company," Soon-Shiong said. "I look forward to helping deliver value for shareholders by applying my technology expertise to accelerate content-monetization."
Soon-Shiong, whose Nant family of companies has developed technology for use in healthcare and other fields, said his investment will allow Tribune Publishing to use some of that technology.
"It's important to take the evolving technology I'm developing for fighting cancer, for science and medicine, and bring such technology to a wider audience," Soon-Shiong said.
Along with the investment from Nant Capital, Tribune Publishing also said it has reached an agreement with another Soon-Shiong company, Culver City's NantWorks, to license more than 100 technology patents and to produce video at that firm's subsidiary, NantStudio.
Soon-Shiong said producing more video content will be a key part of Tribune Publishing's strategy.
"There's no reason why Tribune couldn't become the next CNN," said Soon-Shiong, whose net worth is estimated at nearly $12 billion.
Though Soon-Shiong's capital provides a significant boost to Tribune Publishing's balance sheet, the investment appears to have been structured to give the company additional strength to fight off Oaktree, which last week called Ferro's strategy for the company risky and unproven.
Oaktree owns 4.69 million shares of Tribune to Soon-Shiong's now 4.7 million. Ferro, the top shareholder, owns 5.22 million shares.
What's more, letters sent over the weekend between Oaktree and Tribune Publishing reveal that Ferro asked Oaktree if it would sell its stake to an unnamed, outside buyer for $15 a share -- a proposal Oaktree rejected.
It's not clear if that the outside buyer was Soon-Shiong and Nant Capital, but the size, price and timing of the proposed deal lines up.
Monday's developments are the latest in the acrimonious battle between Gannett and Tribune Publishing.
Gannett had approached Tribune Publishing's board on April 12 with an offer valued at $815 million, including the assumption of debt.
Two weeks later, Gannett made that offer public, saying it believed that Tribune Publishing's board was dragging its feet. Gannett's offer of $12.25 a share represented a 63% premium to Tribune Publishing's closing price before the offer was announced.
Ferro shot back, accusing Gannett of "trying to steal the company."
Gannett escalated the fight with a campaign asking Tribune Publishing shareholders to withhold votes for the company's slate of directors at an upcoming annual meeting, a symbolic move aimed at pressuring Ferro and the board into accepting a deal.
Tribune Publishing rejected Gannett's offer and adopted a so-called shareholder rights plan, commonly known as a poison pill, aimed at preventing Gannett from going directly to Tribune Publishing shareholders with its offer.
Gannett then boosted its all-cash offer to $15 a share on May 16.
Tribune Publishing shares tumbled 18% in early trading Monday on Wall Street, falling to $11.57. Shares had been trading at more than $14 a share following Gannett's $15 offer.
james.koren@latimes.com
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UPDATES:
12:58 p.m.: This article has been updated with comments from analyst Hamed Khorsand of BWS Financial.
12:27 p.m. This article has been updated with a statement from Patrick Soon-Shiong.
11:40 a.m. : This article has been updated with a statement from Gannett.
7:34 a.m.: This article has been updated throughout with staff reporting.
5:46 a.m.: This article has been updated with details on Nant Capital's investment in the company.
12:24 p.m.: This article has been updated with additional comments from Patrick Soon-Shiong.
12:56 p.m.: This article has been updated with comments from analyst Hamed Khorsand.
This article was originally published at 5:15 a.m.
