The proposed acquisition of Tribune Publishing by hedge fund Alden Global Capital offered more drama last week with three shareholders suing to block the sale, reports Poynter. In separate legal actions, three shareholders allege that Tribune Publishing “failed to disclose material information” related to the merger, making the Definitive Proxy Statement “materially misleading.” Through their lawsuits, the plaintiffs hope to stop the merger from occurring following the shareholder vote scheduled for May 21.
According to the Schedule 14A SEC filing by Tribune Publishing, the lawsuits include the filling:
- Wang v. Tribune Publishing, filed on April 28 in the U.S. District Court from the Southern District of New York
- Ciccotelli v. Tribune Publishing, filed on May 4, in the U.S. District Court from the Southern District of New York
- Carlsen v. Tribune Publishing, filed on May 4, in U.S. District Court from the Eastern District of New York
The filing indicates that “additional lawsuits arising out of the merger may also be filed in the future.”
Tribune Publishing said the complaints are “without merit” and that “no supplemental disclosure is required under applicable law.” However, to avoid further holdups and costs, Tribune Publishing said it will voluntarily provide supplemental information to the Definitive Proxy Statement.
“Nothing in these Definitive Additional Materials shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures set forth herein,” said Tribune Publishing in the SEC filing.
The supplemental materials and revisions provided by Tribune Publishing include a mix of clarifications about non-disclosure agreements, negotiations, and the addition of this wording:
“Post-transaction employment, directorships, compensation and benefits for the Company’s directors and officers were not discussed, other than in the context of negotiations over the maintenance of compensation and benefits covenants in the Merger Agreement which are generally applicable to all Company employees.”
The NewsGuild urges shareholders to reject Alden’s offer
These lawsuits were filed at the same time The NewsGuild was making a formal plea to Tribune Publishing shareholders reject hedge fund Alden Global Capital’s offer to buy the company for $630 million in cash. The NewsGuild represents newsroom employees in eight of Tribune’s nine metro newspapers. Alden is known for snatching up newspaper organizations and gutting them to maximize profits, which has led to massive layoffs and a diminished quality of what remains of the newspapers.
Dr. Patrick Soon-Shiong holds the power
Of all these actions, there is one person who has the ultimate power to stop Alden from acquiring Tribune Publishing – Dr. Patrick Soon-Shiong, the owner of the Los Angeles Times. Soon-Shiong is the second largest shareholder of Tribune Publishing with a 24% stake in the company. If he rejects Alden’s offer, the sale can’t go through.
Other efforts to stop the sale, including the lawsuits, The NewsGuild’s desperate plea and Stewart Bainum’s plan to acquire the Baltimore Sun, might possibly delay the proceedings, but Soon-Shion is the only shareholder who can single-handedly halt the sale. Assuming shareholders do approve the sale on Friday, the next steps will be to pass regulatory hurdles which could also be a challenge.
This acquisition has been controversial from the start. It is clear that parties with a vested interest in the acquisition are pulling out all the legal stops to block the sale to Alden. It seems unlikely they will be successful in halting the merger, but they could continue to make it difficult for Alden along the way. We expect the controversy to continue in the weeks and months to come, even if the shareholders approve the sale later this week.