A Tribune Publishing investor sued the Chicago newspaper company’s board for a breach of fiduciary duty to shareholders and is seeking to rescind a recent major stake sale to a Los Angeles billionaire.
The investor, Capital Structures Realty Advisors, contends in the lawsuit filed in Delaware Chancery Court that the company’s chairman, Michael Ferro, engineered a $70.5 million stock sale to the billionaire, Patrick Soon-Shiong, to fend off a hostile $864 million bid by McLean, Va.-based rival Gannett. The board’s approval of the transaction wasn’t in shareholders’ best interest, the derivative lawsuit alleges.
“Plaintiff brings this action to prevent and unwind the preclusive entrenchment transaction the company entered into with defendant Soon-Shiong for improver reasons and for the damages caused thereby,” says the lawsuit filed yesterday.
The lawsuit arrives just as Tribune Publishing’s board is meeting in Los Angeles today for the annual stockholders’ meeting. The company’s rejection of Gannett, which initially bid $12.25 a share and later raised its offer to $15 a share, is sure to be a hot topic of discussion in light of the Tribune Publishing stock’s recent decline to $12 a share. It rose 10 cents to $11.69 in midday trading.
The May stock sale to Soon-Shiong’s firm, Nant Capital, followed the purchase of the biggest stake in the company by Ferro and his Merrick Media co-investors in February.
Tribune Publishing responded to the news in an emailed statement:
“Tribune Publishing just received a copy of the complaint and is reviewing it carefully. The stock sales to Merrick Media and Nant Capital were approved by the Board of Directors and will provide valuable growth capital to allow the company to execute on its new value-creating business plan.”