Tribune Publishing said Monday its board of directors has adopted a “shareholder rights plan,” known to investors as a poison pill, in an attempt to thwart Gannett Co.’s bid to buy all Tribune shares.
In the plan, Tribune, which owns the Los Angeles Times, the Chicago Tribune and nine other dailies, plans to issue new shares if Gannett, or another investor, acquires 20% or more of the company. The move would dilute the acquirer’s stake, thus discouraging in advance any large-stake acquisition plans by an outside investor.
“It is unfortunate that instead of engaging with Gannett to negotiate a mutually agreeable transaction that is in the best interests of all Tribune stockholders, Tribune is putting up another roadblock to prevent its stockholders from realizing compelling, immediate and certain cash value for their investment,” Gannett said in a statement. “The decision to implement a poison pill is yet another demonstration that Tribune’s Board and management team are not listening to its stockholders.”
Tribune’s latest move comes as shareholder pressure grows on its management to negotiate a deal following Gannett’s offer.
On April 25, Gannett, which owns USA TODAY and 107 local news properties, revealed its offer to pay $12.25 per share for Tribune Publishing. Gannett also offered to assume $390 million of Tribune’s debt, bringing the total value of the deal to $815 million.
Tribune’s management — led by board chairman Michael Ferro, who’s also the largest shareholder — has resisted Gannett’s offer, saying it undervalues the company. Last week, Tribune's board unanimously voted to reject Gannett's offer of $12.25 per Tribune share. The price represents a 63% premium to Tribune’s closing stock price of the previous business day. Ferro bought his 16.6% stake in February for $44.4 million, or $8.50 a share.
Last week, Oaktree Capital, Tribune’s second-largest shareholder, said “it would be in the best interests of (Tribune) and its stockholders … to pursue discussions with Gannett to see if an acceptable agreement can be reached for Gannett to acquire (Tribune).”
According to a Tribune filing with the Securities and Exchange Commission, Tribune shareholders get the right to newly issued Tribune shares at a discounted price if an investor buys 20% or more of Tribune’s current shares. The acquirer of the 20% or more isn’t entitled to the rights. The rights holders get to buy the number of common stock shares equal to $75 divided by 50% of the current price. With Tribune’s 32 million shares outstanding, an acquirer of 20% would see its stake diluted to about 1.9%.
“Based on Gannett’s approach and continued hostility, the board is taking prudent measures to protect our shareholders’ best interests,” Tribune CEO Justin Dearborn said in a statement. “The rights plan ensures shareholders receive fair treatment and protection in connection with any proposal to acquire Tribune Publishing and retain the opportunity to realize the value of their investment in the company. Our board is unanimous that Gannett will not succeed with its current tactics and low ball price.”
Shares of Tribune were down 1% early Monday afternoon to $11.50. Gannett shares were down 1.4% to $15.93.
