Chicago Tribune is part of Tribune's newspaper portfolio.
Photograph by Bloomberg via Getty Images
By Mathew Ingram
June 22, 2016

The media world has gotten a lot of laughs out of the official rebranding of Tribune Publishing as Tronc—a word that only a highly-paid corporate branding consultant could love—although the humor has a dark undercurrent to it, like a joke told by an inmate on death row. While journalists may be happy to laugh at the company’s transformation, Tronc shareholders probably aren’t.

That’s because the controversial rebranding of the newspaper chain—which owns the Chicago Tribune and the Los Angeles Times, among other historic brands—is part of a larger story involving controlling shareholder Michael Ferro and his attempt to stave off an acquisition offer from Gannett Co.

Gannett, an even larger newspaper chain that owns USA Today, launched its takeover bid in April with an offer of $12.25 a share or about $400 million. After being rebuffed by Ferro—who accused Gannett of trying to “steal the company”—Gannett boosted its offer to $15 a share or $475 million (excluding debt). That was almost a 100% premium to where Tribune was trading before Gannett expressed an interest.

Ferro was not swayed by this more valuable bid, however. Instead, he brought in a new investor: Patrick Soon-Shiong, a health-care entrepreneur, invested about $70 million in return for a 13% stake in the company. Then the company announced that it was rebranding itself as Tronc, and said that it would be creating a kind of content portal that would aggregate and distribute stories from its various newspapers.

The company’s strategy is laid out in its promotional video, which came out earlier this week, and was instantly criticized as indistinguishable from the kind of parody created by The Onion or the satirical TV series Silicon Valley. Filled with buzzword-laced talk about artificial intelligence and flashy graphics, the video is long on “vision” but short on details.

Tronc’s chief digital officer Anne Vasquez says the company will “harness the power of our local journalism, feed it into a funnel, and then optimize it.” How that will translate into new revenue is unclear. (Soon-Shiong has also talked about his plans to use a machine-vision invention of his own design to somehow connect print readers to the website). The chain plans to produce thousands of hours worth of video, even though the video market increasingly looks like an unsustainable bubble.

In a piece published by the Poynter Institute, Vasquez put forward the case that Ferro understands what the company needs to do to be successful, describing him as “an idea-a-minute guy” who “oozes energy.” But the post was criticized almost as heavily as the video for lacking any real information about how Tronc plans to succeed at digital where other owners of newspaper chains have failed. Senior Tronc executives are now on a tour of their chain’s newsrooms to try and sell their vision.

Meanwhile, Tronc’s share price (TRNC) remains stuck well below Gannett’s last $15 share offer, and even that level is likely being supported mostly by hopes that the company will eventually give in and allow itself to be acquired. One of Tronc’s largest shareholders, Oaktree Capital, has sent a number of letters urging Ferro and the board to open negotiations with Gannett, but to no avail. The most recent letter on June 7 said:

Lest there be any doubt, however, we would sell our shares at $15 per share – and believe that all shareholders should be afforded the opportunity to do so – if the only alternative is to rely on your continued leadership of the company.

Oaktree has made it abundantly clear that it has no confidence in the plans outlined by Ferro—a man who has virtually no experience running a large media business, let alone transforming one into a leading digital competitor. Two other shareholders have sued the company, arguing (among other things) that the board is not doing its fiduciary duty by rejecting Gannett’s offer.

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According to Gannett, many of Tronc’s other shareholders are also skeptical about the company’s future. In a recent vote on whether to retain or reject the board of directors, all of the current members were re-appointed. But in some cases, including that of Michael Ferro, more than 50% of shareholders voted against retaining them. Hardly a resounding vote of confidence.

Gannett has said that it plans to keep its $15-a-share offer on the table until August, but that it will re-evaluate its interest at that point, based in part on Tronc’s quarterly earnings. If Gannett decides to walk, all that shareholders will have left is Ferro’s vision of building a content-aggregation and monetization portal that will somehow generate revenue out of thin air. It will be interesting to see what happens to the stock price at that point.

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