Integrity of Tribune Publishing Sale to Alden Global Capital Called into Question

Was the former board acting in its own self interests?

Hedge fund Alden Global Capital has completed its $633 million deal with Tribune Publishing, but a lot of questions remain about the integrity of interested parties and the sale itself. The deal made Alden the second-largest newspaper owner in the U.S., after Gannett. Shortly after the sale closed, Alden leveraged Tribune Publishing with two loans totaling $278 million, and replaced Tribune Publishing CEO Terry Jimenez with Alden president Heath Freeman, according to a filing with the Securities and Exchange Commission.

Jimenez replaced by Freeman

Jimenez became CEO in February 2020. He received a golden parachute compensation package valued at $2.5 million as part of a settlement agreement to leave the company. The Chicago Tribune says that Jimenez was the only dissenting vote to the Alden sale in February. He objected to the sale price which he felt was inadequate.

In a June 22, 2021 article for Nieman Lab, Julie Reynolds writes that “Alden’s interests were clearly ahead of others” when the board ignored the fact that Alden didn’t actually have the $375 million in cash the hedge fund needed to buy the remaining Tribune shares. Shareholders were misled, believing that Alden had the money in hand, Reynolds says.

In a confidential letter from Alden Global Capital to Tribune Publishing dated December 14, 2020, signed by Randall D. Smith and filed with the SEC, Alden said they could “fully finance the Transaction with cash on hand at the Alden Purchasers and MNG, as a result of which we will have no financing conditions and will not require third party debt or equity to finance the Transaction.” In other words, they wouldn’t need to finance the purchase.

The Chicago Tribune reports that Alden used Tribune Publishing’s cash on hand to help finance the sale, along with two other loans: a $60 million loan at 13% interest from MNG Enterprises, parent company to MediaNews Group, and a $218 million five-year term loan from Cerberus Business Finance. The Chicago Tribune also reports that, at the end of their first quarter, Tribune Publishing was debt-free, profitable and had $250 million in cash.

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Voluntary buyouts at Chicago Tribune

In addition, nearly 40 journalists, editors and support staff at the Chicago Tribune have accepted voluntary buyouts from Alden. Greg Pratt, a reporter and Chicago Tribune Guild president, said, “We are sad to be losing outstanding journalists at the Chicago Tribune but we respect and honor those who are leaving. It’s important to know that outstanding journalists are going to stick around, too, and we will continue doing vital work for our readers.”

Pending lawsuits

In addition to the questionable tactics and behavior of Alden, three shareholders have filed lawsuits against Alden in three separate legal actions. The shareholders allege that Tribune Publishing “failed to disclose material information” related to the merger, making the Definitive Proxy Statement “materially misleading.”

Insider Take

The drama never ends with Alden Global Capital, and we have a feeling that it isn’t over yet. Alden owns Tribune Publishing’s other properties, so there could be additional buyouts offered at those media organizations. In addition, Alden will have to resolve the pending litigation, and it is possible that other lawsuits could stem from the behavior that allegedly violated Alden’s and the board of directors’ fiduciary responsibilities.