Rick Edmonds: A White Knight to the Rescue of Tribune Publishing?

From a post on poynter.org by Rick Edmonds headlined “A white knight to the rescue of Tribune Publishing?”

A New York Times report Sunday evening is likely raising hopes in Tribune Publishing newsrooms that an impending takeover by hedge fund Alden Global Capital can be averted.

In an anonymously sourced story, the Times suggests that Stewart Bainum Jr., who has agreed to buy The Baltimore Sun for $65 million, may be putting together a bid for all 10 of the company’s papers.

That’s possible, but not all that likely in my view.

For a start, Bainum, whose family owns Maryland-based Choice Hotels, would need to come up with at least 10 times the amount he has so far committed. Alden’s bid is valued at $630 million. For Tribune to reconsider its agreement in principle to sell would almost certainly take a firm offer at a substantial premium.

According to the Times, Bainum plans to seek buyers in Chicago and other Tribune markets to come forward to save their hometown papers as he has in Baltimore.

That’s a tall undertaking. Keep in mind that a pair of investigative reporters at the Chicago Tribune went knocking on doors a year ago trying to find a buyer for the chain’s flagship and came up empty. For a breakup to work across the chain, Bainum would also need to find buyers for papers in Orlando, Norfolk, Hartford and more Tribune markets.

The Times piece hints at a second possibility: that Bainum’s tentative agreement with Alden may be coming apart over details, specifically “operating agreements that would be in effect as the Maryland papers transitioned from one owner to another.”

When a newspaper like The Sun is purchased out from a chain, it must rebuild tech systems, newsroom design desks and back-office functions that have been consolidated. In practice, the buyer usually ends up paying to subcontract for those functions from the seller for as long as a year or two.

A Securities and Exchange Commission filing from Feb. 17 describes these arrangements for continuity at The Sun in a “non-binding term sheet” between Alden and Bainum. If that sale does not come about, Alden could complete the acquisition of Tribune Publishing if it provides $65 million on its own.

I have asked representatives of Bainum, Alden and Tribune Publishing for comment and will add to this story if I hear back….

Dr. Patrick Soon-Shiong, whose family owns the Los Angeles Times, also controls 24% of Tribune Publishing stock. That gives him effective veto power over the Alden deal as I explained in a post last month.

The likelihood, though, seems that Soon-Shiong will vote yes and apply proceeds of about $150 million to the development of the Times or his biotech companies.

Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years.

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