The L.A. Times Is in the Middle of Yet Another Power Struggle
Dr. Patrick Soon-Shiong, left, and Michael Ferro
NHS Confederation (Soon-Shiong), Gary He/Insider Images/Polaris/Newscom (Ferro)
There appears to be yet another power struggle over control of America's most hilariously named newspaper chain, tronc (with a lowercase t), formerly known as Tribune Publishing, which includes a little daily newspaper called the Los Angeles Times. This contest pits two rich men against each other: the daring and wily tech entrepreneur and would-be savior of journalism Michael Ferro, and the enigmatic, South African–born surgeon and second richest Angeleno Dr. Patrick Soon-Shiong.
You may recall that a year ago, Tribune Publishing, then headed by CEO Jack Griffin, was looking to buy up as many Southern California newspapers as it could find and had its sights set on the Orange County Register. Strapped for cash, Griffin brought in a new investor, Ferro, who at the time was chairman of the Chicago Sun-Times.
Ferro bought 16.6 percent of the company for $44.4 million, making him the largest shareholder and non-executive chairman of the board. No sooner was Ferro ensconced in power than Jack Griffin was unceremoniously ousted as CEO, replaced by Ferro ally Justin Dearborn.
But Ferro soon faced a challenger to his supremacy when Gannett Company, the largest newspaper chain in America, offered to buy Tribune outright at $15 a share — an offer that would have yielded Ferro a $33 million profit from a three-month investment. Ferro, who apparently preferred to be known as the savior of journalism rather than just another schlub with $33 million, rejected that offer. Discontent bubbled among some shareholders, including those at L.A.-based Oaktree, who thought that $15 a share was a damn good price to pay for a stock whose price had been floating around $8. Ferro appeared to be cornered. Then he pulled a rabbit out of his hat — a rabbit by the name of Patrick Soon-Shiong, then still the richest man in L.A.
Soon-Shiong, a health care technology entrepreneur who'd amassed a fortune once worth nearly $13 billion, had long dreamed of owning the Los Angeles Times and had met Ferro only once before Ferro called him, out of the blue, to invest in tronc. Soon-Shiong agreed. The move was a masterstroke from Ferro, allowing him to keep control of the company without spending a dime of his own money.
Still, Gannett didn't give up. The company eventually upped its bid to around $18.50 a share, an offer that Ferro reportedly was inclined to accept — but the deal fell through at the last minute. A source close to Soon-Shiong says he was pushing hard for that deal to go through and that he believed it may have led to him gaining control of the L.A. Times, bringing the paper back under local ownership for the first time since 2000.
That same source also says that Ferro and Soon-Shiong's relationship soured almost immediately: The doctor was shocked to learn that, at a time when newspapers were laying off staff and struggling to balance their books, tronc had spent $2.7 million leasing a private jet from Ferro's other company, Merrick Ventures; shocked to learn that tronc had spent nearly a quarter million dollars to buy tickets to Chicago Bulls, Blackhawks and Bears games (what, no Cubs tickets?); shocked to learn that Ferro wanted to fire senior newsroom staff "who were writing things he didn’t want to about Oaktree."
Soon-Shiong and Ferro declined to comment for this story.
When Soon-Shiong bought into tronc last year, he told L.A. Weekly: "The thing that interests me — it's not owning a newspaper in its old context but taking the content, using the technology and transforming it. The exciting thing to me was the transforming it." According to the source close to Soon-Shiong, he told Ferro, at one point, "I did not join this board to be a puppet." Sources told Bloomberg that Soon-Shiong's behavior in the board room was "disruptive." And according to the Wall Street Journal: "An executive at tronc said that Dr. Soon-Shiong had a poor attendance record at board meetings and that the push to remove him stemmed from his repeated violation of company bylaws by acquiring shares during blackout periods. The doctor’s camp disputes those claims."
The fight was on. Shortly before the end of 2016, Ferro doubled his tronc stake to just under 25 percent of the company. Then, in February, Soon-Shoing bought a few million shares of his own, upping his stake to 24 percent. The board previously had limited any shareholder from owning more than 25 percent but recently voted to give Ferro permission to buy up to 30 percent. A spokesman for Soon-Shiong says his attorneys will be asking for that same permission.
Then, last week, Ferro lowered the boom: Soon-Shoing was removed as vice president of the board. Not only that but Ferro also bumped up the deadline for nominating a new slate of directors, which means anyone who wants to challenge Ferro from within will have to wait at least a year to do so. Then this week, the finishing touch: Tronc bought back the rest of Oaktree's tronc stock, neutralizing Soon-Shiong's most likely ally. And all it cost the company was $56 million – about a quarter of its cash.
"It solidifies Ferro’s position," says Ken Doctor, newsonomics writer and chief tronc watcher. "That major irritant is gone. And this is another step toward securing his safety and his ownership. And his Oscars tickets."
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Yes, Ferro has proven to be shrewd, always one step ahead of his billionaire rivals.
Now it's Soon-Shiong's move. Will he make a Gannett-sized offer? He has far more money than Ferro – though not as much money as he had a few years ago. According to Forbes, Soon-Shiong's fortune is in a tailspin, having sunk from $12.9 billion in 2015 to $8.6 billion today, thus allowing Elon Musk to overtake him for the title of richest Angeleno.
He's got other problems, too. According to the health care news site STAT, Soon-Shiong's much-hyped effort to cure cancer has yielded little in the way of tangible results. The site also reported that of $12 million he gave to the University of Utah, $10 million was steered back into one of Soon-Shiong's companies. An investor is suing him for alleged securities violations, his bid to be Donald Trump's health care czar failed, and, oh yeah, shares of his company, NantHealth, are worth less than half what they were three months ago.
Of course, he's still filthy rich.
Ferro, meanwhile, is also looking to buy _ tronc came very close to buying US Weekly earlier in the month.
"Ferro is looking for an acquisition," Ken Doctor says. "And it could be bigger than US Weekly. He’s going to have to bring other money into the company. That, again, would change the equation. Who’s he bringing into the company? And at what price?"
"He does seem able to always pull a rabbit out of his hat," says Chicago-based media blogger and Ferro watcher Robert Feder. "And then he kills the rabbit."
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