Michael Ferro is retiring from the board of Tronc ahead of the newspaper chain's $500 million sale of the Los Angeles Times and other California assets.
Ferro's retirement is effective immediately, the company said. Justin Dearborn, chief executive officer of Tronc, was named to succeed Ferro as chairman of the company that also owns the Chicago Tribune, New York Daily News and other major daily newspapers.
"I want to thank everyone who worked so hard over the last two years creating great journalism, strengthening the company's financial position and delivering significant value for shareholders," Ferro, 51, said in a news release Monday. "I am confident that under the leadership of Justin and the rest of the board and management team Tronc will continue to deliver value for investors while executing the plan for digital transformation."
While Ferro is stepping down from the Tronc board, he will continue in his role as a paid management consultant to the company, a result of a three-year, $15 million deal struck in December. Ferro received his first $5 million annual fee, which was paid in advance on Jan. 1, according to financial statements filed with the Securities and Exchange Commission.
"The agreement is in effect for two-plus more years and allows the company to leverage Mr. Ferro's advisory services at the company's discretion," Tronc spokeswoman Marisa Kollias said in an email Monday. The agreement contains a covenant that restricts Ferro from running or working with certain other "daily print newspaper" businesses without Tronc's approval.
By resigning from the company's board, Ferro is giving up 450,000 Tronc shares worth about $7.2 million based on prices Monday. According to a filing with the Securities and Exchange Commission last year, the company promised him a grant of that many shares, but the shares do not begin to vest until August.
Two companies Ferro controls, Merrick Media and Merrick Venture Management, already own more than 9 million Tronc shares, worth $144.8 million based on Monday's stock price of about $16. Ferro acquired most of those shares for just $8.50 apiece.
In recent weeks, Ferro has discussed with his fellow board members and the management team his desire to retire as chairman in connection with the closing of the Times transaction, the company said in the news release.
Last month, Tronc agreed to sell the Los Angeles Times, San Diego Union-Tribune and other California-based assets to Los Angeles biotech billionaire Patrick Soon-Shiong for $500 million in cash. Soon-Shiong, Tronc's second-largest shareholder, also will assume $90 million of pension liabilities tied to the California properties.
The deal is expected to close within weeks. The Federal Trade Commission and Department of Justice cleared the transaction of anti-competitive concerns ahead of the normal 30-day waiting period earlier this month.
Ferro, a technology entrepreneur who previously led the investor group that owned the Chicago Sun-Times, became the largest shareholder and chairman of Tribune Publishing in February 2016, and the corporate name was changed to Tronc shortly thereafter. Soon-Shiong's Nant Capital, a California-based technology firm, became Tronc's second-largest shareholder in June 2016 and that investment helped Tronc fend off a hostile takeover bid from Gannett, whose last offer was $864 million for the company.
"Michael retires having created considerable shareholder value for the company in just two years as chairman of the board," Dearborn said in the release. "We look forward to Michael's continued support as an investor and wish him the best in his retirement."
A longtime business partner to Ferro, Dearborn was appointed CEO of Tronc in February 2016 after leading Merge Healthcare as its CEO.
