A deal that would transform the American newspaper industry ran into complications just a month after a deal was reached, said three knowledgeable people. As a result, New York hedge fund Alden Global Capital may have to fend off a new applicant for Tribune Publishing, the chain that owns major city-wide daily newspapers nationwide, including The Chicago Tribune, The Daily News and The Baltimore Sun, People said.
On February 16, Tribune Publishing’s largest shareholder, Alden, agreed with a 32 percent stake to buy the rest of the chain for $ 630 million. On the deal, Alden would take ownership of all of the Tribune Publishing newspapers – and then outsource The Sun and two smaller Maryland newspapers to a nonprofit owned by Maryland hotel magnate Stewart W. Bainum Jr is controlled.
For the past few days, Mr. Bainum and Mr. Alden have been arguing over the details of the company agreements that would go into effect when the Maryland papers transition from one owner to another. In response, Mr. Bainum has taken the first step to bid for the entire Tribune Publishing.
Mr Bainum has asked the Tribune Publishing Special Committee, a group of three independent board members, for permission to be released from a nondisclosure agreement that bans him from discussing the deal so that he can pursue partners for a new offering, people said.
A spokeswoman for Mr Bainum said he had no comment. Through a spokesman, the Tribune Publishing Special Committee declined to comment. An Alden spokesman had no comment.
Alden has been investing in the newspaper business for more than a decade. Through a subsidiary, the MediaNews Group, the company owns around 60 daily newspapers, including The Denver Post and The San Jose Mercury News. The deal to take over the rest of Tribune Publishing would make it an even bigger force in the news media industry, by some standards the second largest newspaper company after Gannett, the company that publishes one-fifth of all American newspapers, including USA Today.
Journalists have criticized Alden for drastically reducing the costs of its newspapers, often by laying off journalists and reducing local coverage. Over the past year, journalists from several Tribune newspapers have run public campaigns urging local benefactors to buy the newspapers they are employed in so they don’t fall under the control of the hedge fund. Alden claims that it is the rare company that keeps local newspapers from going out of business.
The Alden Tribune deal requires approval from shareholders who own approximately two-thirds of Tribune Publishing shares that Alden does not own. The largest holder of these stocks, with a combined stake of nearly 25 percent, is Patrick Soon-Shiong, the biotech billionaire who owns the Los Angeles Times with his wife Michele B. Chan. Dr. Soon-Shiong, who owns enough of Tribune Publishing to veto the deal himself, has refused to comment on the Alden-Tribune agreement. He declined to comment on Mr. Bainum’s plan on Sunday.
If Mr Bainum manages to reach an arrangement to buy Tribune, he would likely seek local owners for his other newspapers, which include The Hartford Courant, The Orlando Sentinel, and The South Florida Sun Sentinel.
Two of the people said Mr. Bainum, who lives in suburban Maryland, Washington, was willing to put $ 100 million in a bid and then ask for additional investment from others. Since 1997, Mr. Bainum has served as the chairman of Choice Hotels, a multi-billion dollar company that owns the Comfort Inn, Quality Inn, and MainStay Suites brands, a company that grew out of his father’s business.
Alden has been aiming for full ownership of Tribune Publishing since 2019 when it was announced that the company had purchased its 32 percent stake. Last year, an agreement to buy the rest of the company was not reached with an offer valued at $ 520 million for the entire company.
Tribune announced last month that it was holding $ 99 million in cash at the end of 2020. In December, it also announced the sale of a majority-owned subsidiary for $ 160 million.