Sale of Tribune Newspaper Chain to Hedge Fund Faces One Last Challenge

The hedge fund that wants to buy Tribune Publishing, the owner of some of the nation’s major metropolitan newspapers, has one final hurdle to cross.

Shareholders of the newspaper company, whose titles include The Chicago Tribune, The Baltimore Sun and The New York Daily News, will vote on Friday on whether to approve the company’s sale to Alden Global Capital, an investor with a reputation for slashing costs and cutting jobs at the approximately 200 newspapers it already owns.

Alden’s effort to buy Tribune has faced resistance: Journalists at Tribune’s papers protested the sale and publicly pleaded for another buyer to step in. A Maryland hotel executive who had planned to purchase the The Baltimore Sun 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 is to approve or reject Alden’s offer. Tribune’s board has recommended that they vote for the sale.

The deal requires approval by two-thirds of the shareholders other than Alden, which holds a 32 percent stake in Tribune. Dr. Patrick Soon-Shiong, a billionaire medical entrepreneur who owns The Los Angeles Times and a number of other California papers with his wife, Michele B. Chan, has a 24 percent stake in Tribune, which means he alone could sink the sale.

Dr. Soon-Shiong has not commented publicly on how he intends to vote and again declined to do so on Thursday, but his ability to affect the outcome has not gone unnoticed. In an open letter posted on Medium this week, Gregory Pratt, the Chicago Tribune Guild president, begged Dr. Soon-Shiong to vote “No” on Friday.

“As Tribune Publishing’s second-largest shareholder, you can single-handedly keep Alden from sealing the deal,” Mr. Pratt wrote. “We’re not asking you to buy the company, though that would be great. But we are asking you to use your power to stop Alden from consolidating its own.”

Alden began buying up news outlets more than a decade ago and owns MediaNews Group, the second-largest newspaper group in the country, with titles including The Denver Post and The Boston Herald. While buying a newspaper may sound like a questionable investment in an era of shrinking print circulation and advertising, Alden has found a way to eke out a profit by laying off workers, cutting costs and selling off real estate.

“Alden’s playbook is pretty straightforward: Buy low, cut deeper,” said Jim Friedlich, the chief executive of The Lenfest Institute for Journalism, a journalism nonprofit that owns The Philadelphia Inquirer. “There’s little reason to believe that Alden will approach full ownership of Tribune any differently than they have their other news properties.”

The hedge fund’s first priority would be to consolidate operations of Tribune with those of its other newspapers, resulting in job losses and cost savings, predicted Mr. Friedlich, who served as an unpaid adviser to Stewart W. Bainum Jr., the hotel magnate from Baltimore who made a last-ditch effort to rival Alden’s bid.

“This is the strategic logic of the acquisition, and one would hope — but not expect — that the savings from these synergies will be reinvested in local journalism and digital transformation,” he said.

Tribune, Alden Global Capital and Mr. Bainum declined to comment ahead of the vote.

Tribune agreed in February to sell to Alden, which had pursued ownership for years, in a deal that valued Tribune at roughly $630 million.

While a sale to Alden now seems inevitable, the twists and turns of recent weeks had seemed to favor Tribune’s reporters.

Mr. Bainum emerged as a potential savior in February, when he announced 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 his deal with Alden soon ran aground as negotiations stalled over the operating agreements that would be in effect as the papers were transferred.

So Mr. Bainum made a bid for the whole company on March 16, outmatching Alden with an offer that valued the company at about $680 million. He was then joined by Hansjörg Wyss, a Swiss billionaire who lives in Wyoming and had expressed an interest in owning The Chicago Tribune. Mr. Bainum would have put up $100 million, with Mr. Wyss financing the rest.

Tribune agreed to consider the bid from the pair, who formed a company called Newslight, saying on April 5 that it would enter negotiations because it had determined that the deal could lead to a “superior proposal.” Part of the discussions included access to Tribune’s finances.

Mr. Wyss took himself out of the equation less than two weeks later, exiting the bid after his associates reviewed the books. Part of the reason for his decision, according to people with knowledge of the matter, was the realization that his plans to transform the Chicago newspaper into a competitive national daily would be near impossible to pull off.

Mr. Bainum notified Tribune on April 30 that he would increase the amount of money that he would personally put toward the financing from $100 million to $300 million, as he hunted for like-minded investors to replace Mr. Wyss. In addition to needing to fund the balance of his bid, $380 million, Mr. Bainum’s offer was contingent on finding someone to take on responsibility for The Chicago Tribune, according to three people with knowledge of the discussions.

His effort seems to have fallen short.

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