The second-largest shareholder in Tribune Co. told the company’s board Wednesday that it sees “very substantial risk” that the company’s failure to agree to a sale to fellow publisher Gannett “will destroy enormous shareholder value.”
The letter to Tribune’s leaders, from Los Angeles-based Oaktree Capital Management, urged the owner of the Los Angeles Times and Chicago Tribune “to engage Gannett immediately and seek to negotiate a transaction in the interest of all Tribune shareholders.”
Virginia-based Gannett, the largest newspaper publisher in the U.S. by circulation, recently sweetened its earlier offer for Tribune, with a $15-a-share all cash proposal that amounts to a near doubling of the Chicago’s company’s value before it initiated buyout talks. Gannett and Oaktree also said they would push for shareholders to withhold their votes for the Tribune board at an upcoming meeting, to increase pressure for a sale to the larger newspaper company.
Oaktree, which holds nearly 15% of the common stock in Tribune, said in its letter that it does not have confidence that the Chicago-based company’s own plan for digital expansion will produce anything like the increased value offered by Gannett.
“The ideas we have heard appear to be preliminary and involve great execution risk,” Oaktree Vice Chairman John B. Frank said in his letter to the Tribune board. “Companies with much greater resources than Tribune and with a substantial head start are struggling in a rapidly changing environment to effect digital change that is profound enough and quick enough to overcome the outgoing tide of print revenues.”
The letter continues: “In summary, we have not seen anything to give us any confidence that Tribune on its own, with the resources and competitive position it has today, can achieve over any reasonable period of time the value for shareholders that we believe can likely be achieved through a transaction with Gannett. And we see very substantial risk that through pursuing an independent course, Tribune will destroy enormous shareholder value.”
After forcefully recommending sales talks with Gannett, Frank concludes: “We expect you to carry out the fiduciary duty that you owe to all shareholders, and believe that the only possible conclusion consistent with your fiduciary duty is to engage with Gannett with the objective of maximizing value to all Tribune shareholders.”
Tribune had previously said it would consider the sweetened, $15-a-share offer from Gannett, but it had not formally responded as of Wednesday afternoon.