Tribune Publishing, owner of some of the largest metropolitan newspapers in the United States, will be acquired by a hedge fund with a reputation for slashing costs and cutting newsroom jobs, after shareholders voted to approve the deal Friday.
The sale of Tribune, whose titles include the Chicago Tribune, The Baltimore Sun and the New York Daily News, to Alden Global Capital comes at a time of crisis for local news. The coronavirus pandemic exacerbated the headwinds facing small newspapers as spending from advertisers collapsed. But even before the pandemic, more than 2,000 U.S. newspapers closed between 2004 and 2019, and about half of the jobs in the industry were lost, according to researchers at the University of North Carolina.
The losses have hollowed out local news coverage across the country, and with growing polarization and rampant disinformation, reliable coverage of institutions like state houses and city councils is more important than ever. The slump has crippled outlets that people rely on to know about everything from school board decisions to local sports scores.
Alden, the second-largest newspaper owner in the country, will gain control of nine daily newspapers, adding them to a stable of about 200 other publications. Alden says its intention is to ensure newsrooms can survive, but its critics point to a record of slashing spending and cutting back on reporting as it focuses on extracting profits for its shareholders.
“What we’ve seen over the last year is a reaffirmation of how vitally important local news is and how much we depended on having a trustworthy source of news and information,” said Penny Abernathy, a visiting professor at Northwestern University’s journalism school. “But at the same time, we saw how economically fragile the whole local news ecosystem is.”
After the sale to Alden was announced in February, journalists at Tribune’s papers protested the deal and publicly pleaded for another buyer to step in. Stewart Bainum Jr., a Maryland hotel executive who had planned to buy The Baltimore Sun from Alden, offered a glimmer of hope when he emerged with a last-minute offer for the entire company. He was backed for a brief time by a Swiss billionaire.
But the rival bid never fully came together, so the choice facing Tribune’s shareholders was to approve or reject Alden’s offer, which valued the company at roughly $630 million.
The company’s second-largest shareholder, Patrick Soon-Shiong, abstained from voting, saying through a spokesperson Friday that he considered his investment to be a “passive” one. Soon-Shiong, a billionaire who also owns the Los Angeles Times, had been seen by Tribune employees who opposed the sale as their last hope, because a “no” vote from him would have blocked the deal.
“He should have taken a stand as a civic leader in journalism,” said Gregory Pratt, president of the Chicago Tribune Guild. “He had a responsibility in my opinion to vote ‘no,’ but at the bare minimum he had a responsibility to take a firm stance one way or the other instead of punt.”
Soon-Shiong’s decision not to vote caused some confusion over the status of the deal. Approval required a two-thirds “yes” vote by investors other than Alden, which owns 32% of Tribune, and the company’s shareholder filings stated that an abstention would count as a vote against the sale.
But Tribune counted the vote as a “yes,” because Soon-Shiong did not check the “abstain” box on the ballot, a person with knowledge of the vote said, asking not to be identified discussing private information.
Tribune said the deal received approval from 81% of non-Alden shares. “Proxies submitted without a checked box were voted in favor of approval of the merger agreement, in accordance with the board’s recommendation, as provided by the proxy card and the proxy statement,” it said in a statement.
The sale is expected to close by Tuesday, the company said.
The vote underscores the growing might of financial firms in a consolidating media industry. Investors, seeing opportunities to buy distressed assets at bargain prices, have swooped in over the past decade, with plans to make money by drastically cutting costs, laying off workers, combining operations and selling off real estate holdings.
In that time, Alden amassed a media empire through its MediaNews Group, which owns newspapers including The Denver Post and The Boston Herald. In August, family-owned publisher McClatchy was sold to the hedge fund Chatham Asset Management after a bankruptcy auction. Gannett, publisher of USA Today, was bought by New Media Investment Group, the parent company of GateHouse Media, in 2019 with financing from the private equity firm Apollo Global Management.
Alden first signaled its pursuit of Tribune when it announced in November 2019 that it had bought the 32% stake in the company. Tribune, whose other papers include the Hartford Courant, The South Florida Sun Sentinel and The Virginian-Pilot, has struggled to grow its digital subscription business and has cut costs and shed journalists in recent years. (It said in its latest earnings release that it had 436,000 digital subscribers at the end of 2020.)
“The purchase of Tribune reaffirms our commitment to the newspaper industry and our focus on getting publications to a place where they can operate sustainably over the long term,” Heath Freeman, president of Alden, said in a statement Friday.
But Pratt of the Chicago Tribune said the company’s journalists were concerned about Alden’s ownership because of the way it has managed its newspapers. Alden steadily cut jobs at The Denver Post by half in eight years.
“They dramatically cut the public service that we are able to perform by reducing personnel dramatically for no reason other than greed,” Pratt said.
The hedge fund’s first priority is likely to be to consolidate Tribune’s operations with those of its other newspapers, resulting in job losses and cost savings, said Jim Friedlich, CEO of The Lenfest Institute for Journalism, a journalism nonprofit that owns The Philadelphia Inquirer.(STORY CAN END HERE. OPTIONAL MATERIAL FOLLOWS.)“Alden’s playbook is pretty straightforward: Buy low, cut deeper,” said Friedlich, who served as an unpaid adviser to Bainum, the hotel magnate. “There’s little reason to believe that Alden will approach full ownership of Tribune any differently than they have their other news properties.”
Tribune agreed in February to sell to Alden. At the time, Bainum said that he would establish a nonprofit to buy The Baltimore Sun and other Maryland newspapers from Alden once its purchase of Tribune went through. But negotiations on the specifics of that purchase ran aground, and Bainum instead made a bid for the whole company.
That offer valued Tribune at about $680 million, and he was then joined by Hansjörg Wyss, a Swiss billionaire who lives in Wyoming and had expressed an interest in owning the Chicago Tribune. Bainum would have put up $100 million, with Wyss financing the rest.
But Wyss took himself out of the equation less than two weeks later. Part of the reason for his decision, people with knowledge of the matter said at the time, was the realization that his plans to transform the Chicago newspaper into a competitive national daily would be nearly impossible to pull off.
Although Bainum sought another partner, he was never able to make a viable offer for the company. And with a deal for The Baltimore Sun and other Maryland papers also scuttled, he is left trying to find a new way to enter the news business. Bainum said Friday that he remained focused on Baltimore, was evaluating different options for supporting local nonprofit newsrooms and would make an announcement in the coming days.
“While our effort to acquire the Tribune and its local newspapers has fallen short, the journey reaffirmed my belief that a better model for local news is both possible and necessary,” Bainum said in a statement.
Abernathy said there were reasons to be optimistic about the future of local news, including a growing awareness outside of the media industry of its current state and its important civic role.
“Given the interest that has been shown by various local billionaires and entrepreneurs in purchasing the various papers and bringing them into local ownership, we may see the start of a new trend,” she said.