May 26--Another major Tribune Publishing investor is crying foul over the company's rejection of Gannett's buyout offer -- even as a second advisory firm weighed in to give the board cover against a possible shareholder lawsuit.
In a letter sent Tuesday to Tribune's board, St. Louis investment firm Towle Co. criticized as "disturbing developments" Tribune's decisions to turn down Gannett and bring L.A. billionaire Patrick Soon-Shiong on board as an investor.
The letter echoed concerns raised last week by Tribune's third-largest shareholder, Oaktree Capital Management. Both investment firms made an implicit threat of a shareholder lawsuit.
But such a suit may be difficult to win thanks to reports from firms that advise public company shareholders. On Tuesday, Glass Lewis said it appeared that Tribune's board gave Gannett's offers a serious look before turning them down.
"That the board ultimately arrived at a negative reply in each case does not, on its own, suggest there was an inadequate review of each offer, in our view," the report said.
Institutional Shareholder Services, another advisory firm, released a report over the weekend making a similar case.
In its letter, Towle called the stock sale to Soon-Shiong's firm, Nant Capital, "most distasteful" and said the deal, which diluted the holdings of Towle and other existing Tribune shareholders, is a clear sign the board is not looking out for shareholders.
Towle holds a nearly 4% stake in Tribune, making it the company's sixth-largest shareholder. It had ranked fifth until Tribune over the weekend sold 4.7 million new shares to Soon-Shiong in a deal that makes the biotech entrepreneur the company's No. 2 shareholder and gives him a seat on Tribune's board starting next month.
"Your brazen efforts of late have disrupted our belief in fair play," Towle executives wrote. "We now believe your primary interest is self-interest. You have fully demonstrated a lack of concern for the majority of unaffiliated shareholders whom we believe want a fair and reasonable transaction with Gannett."
That kind of language could indicate the firm is considering suing the board for failing to act in shareholders' best interests. Oaktree used similarly threatening language in a letter last week, saying the board's only reasonable course of action would be to pursue a deal with Gannett.
Also like Oaktree, Towle in its letter questioned the tech-heavy turnaround strategy outlined by Tribune Chairman Michael Ferro and Chief Executive Justin Dearborn.
"The gut-wrenching transformation of newspapers to the digital age is complex and difficult," Towle wrote. "There is a possibility that you won't attain your lofty turnaround goals."
J. Ellwood Towle, chief executive of Towle Co., told The Times he could not comment on the possibility of a shareholder suit, but added that he was "very, very disappointed" with Tribune's recent moves.
Tribune spokeswoman Dana Meyer said any assertion that the board is not working on shareholders' behalf is "simply false."
"The board takes its fiduciary duties seriously and continues to act in the best interests of all shareholders," she said.
james.koren@latimes.com
Twitter: @jrkoren
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UPDATES:
3:02 p.m.: This story has been updated to include information about a report from advisory firm Glass Lewis.
This story was first published at 1:42 p.m.
