Tribune Publishing adopts ‘poison pill’ defense against Gannett

Tribune Publishing Co.’s board has adopted a shareholder rights plan to defend itself against Gannett Co.’s unsolicited bid to buy the newspaper company.

The publisher of the Chicago Tribune, the Los Angeles Times and other papers said Monday that the plan, commonly known as a poison pill, would kick in if a group buys more than 20% of Tribune Publishing’s shares or begins a tender offer to seek a 20% stake from existing shareholders.

When the plan is triggered, existing shareholders, other than an acquiring entity, could buy preferred shares at a substantial discount, thereby diluting the stake of any acquiring company and making a takeover more expensive. The plan expires in a year.

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Tribune Publishing’s adoption of the defense, widely used in hostile takeover battles, follows its formal rejection last week of Gannett’s April 12 offer of $12.25 a share to acquire the company in a deal that was valued at $815 million, including the assumption of $390 million in debt.

“Tribune’s assets and brands, including the Los Angeles Times and the Chicago Tribune, are worth far more than Gannett’s proposal, which is a nonstarter,” Tribune Publishing Chairman Michael Ferro said in a news release.

“We are focused now on supporting our team as they execute on our plan — we are going to support our outstanding journalists who create world-class content — and we are working to create superior value for our shareholders,” he said. “We recognize that we need to move quickly and we are not going to let this noise from Gannett distract us.”

Corporate governance expert Charles Elson said Monday the poison pill approach effectively prevents Gannett from going directly to Tribune Publishing shareholders with a tender offer for their shares, forcing negotiations to run through the board.

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“Poison pills ultimately ... just encourage further negotiation and sometimes maybe a higher price,” said Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. “They generally do not stop the transaction itself.”

If a deal is struck, the Tribune Publishing board can remove the poison pill at any time and allow the transaction to proceed, Elson said.

On Friday, Oaktree Capital Management, Tribune Publishing’s second-largest shareholder behind Ferro’s Merrick Media, said in a regulatory filing that Tribune Publishing should “pursue discussions with Gannett to see if an acceptable agreement can be reached.”

In a statement Monday, Gannett said: “It is unfortunate that instead of engaging with Gannett to negotiate a mutually agreeable transaction that is in the best interests of all Tribune stockholders, Tribune is putting up another roadblock to prevent its stockholders from realizing compelling, immediate and certain cash value for their investment.”

“The decision to implement a poison pill is yet another demonstration that Tribune’s board and management team are not listening to its stockholders,” Gannett said. “Gannett continues to believe in the strength of its $12.25 per share all-cash proposal and its ability to advance Tribune’s publications and journalism as part of Gannett’s USA Today network.”

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UPDATES:

9:39 a.m.: This article was updated with comments from corporate governance expert Charles Elson and additional background information.

8:57 a.m.: This article was updated throughout with Chicago Tribune staff reporting.

An Associated Press version of this article was originally published at 7:19 a.m.