May 25, 2016 Last Updated 2:54 pm

Major TPUB shareholder appeals to Board of Directors in favor beginning talks with Gannett

Towle & Co., which controls 1.4 million shares or just under 4 percent of TPUB common stock, goes public with its letter to Board

Another major shareholder in Tribune Publishing today expressed a desire to get the publisher of the Los Angeles Times and Chicago Tribune together with its suitor, Gannett.

Towle & Co., which controls 1.4 million shares or just under 4 percent of TPUB common stock, sent a letter to Tribune Publishing’s Board of Directors lamenting the “hostile environment that has erupted between Tribune Publishing and Gannett.” (Full letter below)

The St. Louis-based investment firm had previously sent a letter to the Board of Directors, but today went public, saying that the board “has abandoned its fiduciary responsibility of maximizing shareholder value.”

Tribune Publishing disagrees. “The Board of Tribune Publishing stands ready to work with Gannett to assess whether there is a path forward that will create more value for both sets of shareholders,” Tribune Publishing said in a statement released this afternoon. “The Board takes its fiduciary duties seriously and continues to act in the best interests of all shareholders. Assertions to the contrary are simply false.”

Oaktree Management Group, which at the time, was Tribune’s second largest shareholder, has also gone public hoping to get the board of Tribune Publishing to begin discussions with Gannett.


Gannett originally proposed a month ago that it acquire the newspaper chain, which also owns such metro papers as the San Diego Union Tribune and the Baltimore Sun, for $12.25 in cash per share. It then raised that offer to $15 per share a couple of weeks later.

But Tribune’s chairman, Michael Ferro, moved to reject the bids, and brought in a new investor: Dr. Patrick Soon-Shiong’s Nant Capital, which invested $70.5 million to become the publisher’s second largest shareholder.

Tribune is also telling its shareholders that proxy voting and corporate governance advisory firms such as Glass, Lewis & Co. and Institutional Shareholder Services are recommending that shareholders back the slate of Tribune board members rather than vote ‘Withhold’ as Gannett has recommended.

But these moves have only led to the stock being driven down sharply from its high of $14.26 to where it is trading today, $11.95, and 18 percent drop. (It closed at $12.04 on Wednesday.)

Here is Towle & Co.’s letter to the Board of Directors of Tribune Publishing:

May 26, 2016

Dear Board of Directors:

There is no joy expressed at Towle & Co. in forwarding the enclosed message to you. We are saddened by the hostile environment that has erupted between Tribune Publishing and Gannett. Our expectation is that both parties will act in the best interests of their shareholders, employees, and customers.

Towle & Co. continues to control 1.4 million shares or 3.85% of Tribune’s common stock including the recent dilution. We requested in our letter of May 18, 2016 (see attached) that the Tribune Board of Directors open discussions with Gannett utilizing their $15 per share offer as a “viable starting point to quickly negotiate a final transaction price.” To date, this action has not occurred. Our letter of May 18, 2016 was addressed to the Board of Directors of Tribune only. In light of recent, disturbing developments, we now feel the need to share our views publicly.

From our view as an unaffiliated shareholder, the Tribune Board of Directors has abandoned its fiduciary responsibility of maximizing shareholder value. You have shrugged off the sincere interest of Gannett in the potential purchase of Tribune Publishing. We are greatly perplexed at your unreasonable, capital destructive position. As we write this letter, Tribune stock is down 15% to less than $12 a share.

The gut-wrenching transformation of newspapers to the digital age is complex and difficult. Our concerns persist that Tribune’s revenue and earnings will decline in coming quarters. Such a result will likely weaken support for the company by the investment community. It may take a number of years to establish a pattern of revenue and earnings growth. Also, there is a possibility that you won’t attain your lofty turnaround goals. Failure of Tribune in its current form is a distinct possibility.

Your decision to dilute our ownership position by issuing 4.7 million shares to Nant Capital, LLC was most distasteful. Furthermore, stacking the Board and ownership in favor of one particular view is not good governance. In fact, your brazen efforts of late have disrupted our belief in fair play. 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.

We are greatly disappointed in your recent actions. You have impaired the ability of Towle & Co. to bring value to its clients. For the benefit of all shareholders, we urge the Tribune Board of Directors to negotiate and close a transaction with Gannett at a price greater than $15 a share. Let common sense and wisdom prevail.


J. Ellwood Towle
Chief Executive Officer, et al.

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