Ferro, the majority shareholder, is selling out to McCormick Media pending regulator approval. Sargent McCormick is part of investor group.
A McCormick is getting back into the newspaper business in Chicago and Michael Ferro — the would-be media mogul who once held sway over the Chicago Sun-Times and the Chicago Tribune — is getting out. Ferro, the largest stockholder of the company that owns the Chicago Tribune, is selling his stake in tronc to McCormick Media for $208.6 million — a 34 percent premium over Friday's closing share price of $17.15.
Ferro is selling more than 9 million shares at $23 a share, according to a filing with the Securities and Exchange Commission. The transaction must be approved by federal regulators, but it's expected to close on or before May 15, according to the filing. Ferro bought a 17 percent stake in Tribune stock for $44.4 million in 2016 and increased his holdings to 26 percent of company stock.
McCormick Media is connected to the McCormick family, which owned the Tribune for much of its history. The SEC filing lists Sargent McCormick as one of the "buyer parties." Other names include John Lynch and Clancy Woods. Sargent McCormick graduated from the University of Virginia in 2007. He's written a book about his famous ancestors due to be published this year.
The Tribune published its very first edition in Chicago on June 10, 1847. A source told the Chicago Tribune the new investor group approached Ferro in recent weeks.
Current tronc chairman and CEO Justin Dearborn released this statement late Friday regarding the pending transaction.
“This afternoon Merrick Media, LLC, which is controlled by Michael W. Ferro, filed an amendment to its Schedule 13D filing in which it announced that it had entered into a definitive agreement to sell all of its shares in tronc, Inc. to McCormick Media LLC in a transaction to which tronc, Inc. was not a party. I want to emphasize that this is a private transaction between Merrick and the buyer and does not alter our business strategy or the pending sale of the California News Group.”
Ferro's tenure as a media baron lasted six-and-a-half years.
Last month, the 51-year-old Ferro abruptly announced his "retirement" as chairman of the company's board of directors. Later that day, allegations of Ferro making inappropriate sexual advances to business colleagues were reported in Fortune magazine. Neither of the women quoted in Fortune worked for tronc. They were interested in striking business deals with Ferro, Fortune reported. Ferro, however, was interested in unwanted kissing, come-from-behind hugs and breast groping, according to the Fortune report.
Ferro's reign over tronc has been marked by drama, controversy and intrigue — much of it as unwanted as Ferro's alleged kissing, hugging and groping.
Dearborn — whose compensation exceeds $8 million a year — assumed the chairmanship in addition to his CEO duties upon Ferro's departure. Morningstar revealed that Ferro, Dearborn and other executives hiked their own compensation by 80 percent in 2016 at the same time net income dropped 15 percent — paying themselves more than executive leadership at the New York Times, Gannett and other media companies.
Just a few days ago, journalists at the Tribune announced formation of a labor union. Forty-six staffers signed a letter announcing the union drive. Media columnist Robert Feder — unceremoniously dropped by Ferro in the fall of 2016 — reported on the move and the letter.
“A series of corporate owners — tronc being only the most recent — has jeopardized our ability to do great work. ... Regular raises, cost-of-living adjustments and job security are non-existent. The cost of our healthcare benefits has significantly increased. Our maternity and paternity policy is inadequate. . . . Our primary goal in forming a union is to give us, the Tribune’s journalists, a voice in setting the course for the publications we hold dear.”
In December 2017, according to regulatory filings, the company awarded Ferro's Merrick Ventures a $15-million, three-year consulting contract for "management expertise" even as tronc was planning the spring layoff of journalists. Ferro also had tronc paying Merrick Ventures for Ferro's use of Merrick's private jet.
tronc is starving newsrooms while paying for management advice from someone who told a woman to perform a sexual act to advance her career. https://t.co/2zBKPezKRE (He resigned from the board hours before that was revealed.) https://t.co/axKW09PctS
— Peter Nickeas (@PeterNickeas) April 15, 2018
Chicago-based tronc, which operates the New York Daily News, the Baltimore Sun and other papers, announced last month the sale of the Los Angeles Times (which also recently unionized) and San Diego Union-Tribune for $500 million and an additional $90 million in pension benefits to billionaire Patrick Soon-Shiong, a tronc shareholder who feuded with Ferro in recent years.
The journalists at the L.A. Times were aghast at Ferro's intentions for their news operation. The ill will began shortly after Ferro took control of the company — and then took Oscars tickets intended for journalists so the "celebrity obsessed" Ferro and his pals could attend the 2016 Academy Awards.
Known as a tech entrepreneur, Ferro took over Tribune Publishing in February 2016 when he became the largest shareholder. Ferro, the principal partner in the ownership team of the Chicago Sun-Times, invested $44.4 million in Tribune Publishing for a 17 percent stake in the company. Ferro and partners bought the Sun-Times in 2011 for $20 million.
The day he assumed his ownership stake, Ferro moved from his Sun-Times office into the chairman's office at the Tribune building and began calling the shots. Shortly thereafter, he ousted the CEO who had invited him to buy Tribune stock, Jack Griffin. Ferro replaced Griffin with Dearborn.
In June, Ferro changed the company's name to tronc — digital shorthand for tribune online content — which spurred much mirth and ridicule across the news industry.
It's impossible to say, "I work for #tronc," and not have people wonder how you managed to dress yourself this morning.
— (((Mike Glenn))) (@mrglenn) June 2, 2016
Ferro envisioned a "content curation and monetization company focused on creating and distributing premium, verified content across all channels. tronc, or tribune online content, captures the essence of the Company's mission. tronc pools the Company's leading media brands and leverages innovative technology to deliver personalized and interactive experiences."
He followed up with an effort at "culture change" within the company formerly and famously known as Tribune Publishing.
For a while, Chicagoans feared the city would become a one-newspaper town as speculation ran wild that Ferro would try to consolidate the Chicago Tribune and the Chicago Sun-Times, even after Ferro allegedly divested himself of his Sun-Times ownership stake. The tabloid went up for sale in May 2017, and for a while Ferro's tronc appeared to be the only suitor.
The Justice Department intervened, however, and took a dim view of Ferro's possible control of both papers. Bids were sought, and the Sun-Times was purchased for $1 by an ownership group comprised of labor unions and led by Edwin Eisendrath.
Throughout 2016, Gannett tried to buy out tronc. At one point, the two companies had agreed on a purchase price of $18.75 a share. At the time, tronc was also facing the threat of lawsuits from multiple shareholders accusing Ferro and his crew of neglecting its fiduciary duty at tronc.
The drama over who owns the Chicago Tribune and tronc may not end with Ferro slithering out of the picture and Sargent McCormick and friends becoming stockholders. The New York Post is reporting that billionaire Leon Black wants to buy the entire company. News industry analyst Ken Doctor has been predicting tronc will be put up for sale and could even be broken up.