Friends of Eli make broad pitch to change paper owners

L.A. hedge fund pushes for Union-Tribune chain sale to Gannett

Eli Broad interviewed by Tavis Smiley
  • Eli Broad interviewed by Tavis Smiley

It wasn't very long ago that Fox News media mogul Rupert Murdoch was predicting that the L.A. Times and San Diego Union-Tribune would soon be in the hands of fellow billionaire Eli Broad.

But Murdoch's November 27 tweet was followed by Broad's denial a week later on Tavis Smiley's public TV show.

"Not that I'm aware of... No truth to it as far as I know," Broad said of Murdoch's report.

"What do you mean ‘as far as you know’?” Smiley retorted. "You're Eli Broad, you would know if there were truth to it."

Responded Broad, "I don't know of anything going on. I've made inquiries. I'm not aware of anything going on, nor other people at Chicago Tribune Company."

Since then, a lot of big wheels have been in motion at what is officially known as Tribune Publishing, though the declining newspaper chain has still to gain any turnaround traction.

Michael Ferro

Michael Ferro

On February 4, Chicago's Michael Ferro, heading an investment group including some of the city's biggest financial players, grabbed control of Tribune with a $44.4 million stock buy that netted him 17 percent of the company.

Jack Griffin

Jack Griffin

Ferro soon dumped CEO Jack Griffin and vowed to remake the firm's papers into internet wonders.

But details of Ferro's plans were slow to emerge, other than the new chairman's February use of free Oscar tickets set aside for L.A. Times reporters assigned to cover the event.

Then came yet another would-be new broom in the form of national news giant Gannett, which last month made an $815 million offer, since sweetened, to take over the chain. The move was spurned by Ferro and his board, which adopted a so-called poison-pill defense to ward off unwanted suitors.

Now comes L.A.-based Oaktree Management, Tribune's largest shareholder after Ferro.

 John B. Frank

John B. Frank

"We have met with Michael Ferro and spoken with him on the phone, and we have listened to his ideas about building value as a standalone company through a digital transformation of Tribune," says Oaktree vice chairman John B. Frank in a pitch to Tribune’s board filed with the Securities & Exchange Commission May 18.

Frank says he is not impressed.

"The ideas we have heard appear to be preliminary and involve great execution risk. 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."

Continues the investor, "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."

Thus, adds Frank, "Our conclusion is that we are convinced that you and Tribune’s management should engage Gannett immediately and seek to negotiate a transaction in the interest of all Tribune shareholders. 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."

Jay Wintrob

Jay Wintrob

Oaktree CEO Jay Wintrob used to be a big honcho at Eli Broad's SunAmerica insurance operation and currently sits on the board of governors for the Broad Foundation, a multibillion-dollar nonprofit that funds Broad causes, from fine art to charter schools and medical research.

Broad's longtime theme has been that the L.A. Times should fall under local control, with himself as the paper's best master, and some in the news-watching business, including blogger Ken Doctor, have continued to speculate that Gannett might spin off the Times to Broad after closing the deal for Tribune Publishing.

Others note that the Union-Tribune now relies on the Times to print its papers at its Los Angeles plant after Tribune shuttered the U-T’s own presses last year, making the U-T’s ultimate fate more perilous than ever, whether Broad shows up to buy or not.

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I seriously doubt that you will see or hear anything on this reported in the Times or in the U-T.

Times and the UT are keeping very quiet about all these things going on behind the scenes.

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