June 02--A Tribune Publishing shareholder filed a lawsuit in a Delaware court Wednesday, charging Chairman Michael Ferro and the board with breaching their fiduciary duty in rejecting Gannett's $15-per-share offer to buy the company.
In the lawsuit, Capital Structures Realty Advisors alleges Ferro stacked the board with "loyalists" and sold 4.7 million newly issued shares to Nant Capital last week to blunt shareholders that are urging Tribune Publishing to negotiate a deal with Gannett.
The lawsuit seeks an injunction to halt the stock sale to Nant, a California-based technology investment firm headed by Dr. Patrick Soon-Shiong, which paid $15 a share, or $70.5 million, for its stake. The deal made Nant Tribune Publishing's second-largest shareholder and Soon-Shiong, who supports Ferro's transformation plan, was invited to join the Tribune Publishing board as vice chairman.
"Despite calling Gannett's offer of $15 per share inadequate, the board then agreed to sell 13 percent of the company to Soon-Shiong for that very same price," the lawsuit said. "Because the board agreed to the sale ... in order to entrench itself ... it will have the burden of proving the entire fairness of the transaction."
California-based Capital Structures Realty Advisors, which owns less than a 5 percent stake, also wants a special committee of new independent directors to consider Gannett's offer for Tribune Publishing.
"Tribune Publishing just received a copy of the complaint and is reviewing it carefully," Tribune Publishing spokeswoman Dana Meyer said in an email Thursday.
In a statement, Gannett said, "The lawsuit is further validation that Tribune Publishing's own stockholders believe that the Board has shown a disregard for all its stockholders' best interests and has prevented stockholders from realizing superior and certain cash value for their shares by approving a series of questionable actions over the past few months."
Investment firms Oaktree Capital Management and Towle Co., which own roughly 13 percent and 4 percent of Tribune Publishing's shares, respectively, also have pushed the company to negotiate a sale to Gannett.
The lawsuit was filed on the eve of Tribune Publishing's annual meeting Thursday in Los Angeles. Gannett has waged a proxy campaign that encouraged shareholders to withhold support for the company's slate of eight directors up for election.
Ferro became the company's chairman and largest shareholder through a $44.4 million investment in February.
McLean, Va.-based Gannett, publisher of USA Today and more than 100 other newspapers, upped its unsolicited bid for Tribune Publishing last month to $15 per share, a deal that valued the company at $864 million including debt. Tribune Publishing's board rejected the offer.
rchannick@tribpub.com
