Michael Ferro, majority owner of the Chicago Sun-Times, has become the largest shareholder in Chicago-based Tribune Publishing, parent company of the Chicago Tribune, Los Angeles Times and other major daily newspapers.
Tribune Publishing sold more than 5.2 million shares of newly issued common stock to Merrick Media, a Chicago-based investment firm controlled by Ferro, in a $44.4 million deal announced Thursday.
The purchase gives Ferro, a successful technology entrepreneur and nascent media baron, a nearly 17 percent stake in Tribune Publishing and a significant say in the direction of the legacy newspaper company as it navigates its digital future. Ferro, 49, will become nonexecutive chairman of Tribune Publishing’s board.
“I am excited to be working with the company’s award-winning brands,” Ferro said in a statement. “I see tremendous upside to create value and put Tribune Publishing at the forefront of technology and content to benefit journalists and shareholders.”
Merrick Media’s holdings surpass Los Angeles-based investment firm Oaktree Capital Management. Tribune Publishing filed paperwork with the Securities and Exchange Commission in November, signaling Oaktree’s interest in selling its 4.7 million shares.
Under terms of the transaction, Ferro’s firm cannot acquire more than 25 percent of the outstanding shares and cannot sell its stake in Tribune Publishing for three years.
Eddy Hartenstein, who has served as Tribune Publishing’s nonexecutive chairman since its August 2014 spinoff from Tribune Media, will remain on the board.
Ferro will retain an ownership interest in Wrapports, the investment group that bought the Sun-Times in December 2011, but he will relinquish “all operating involvement” with the newspaper, said Dennis Culloton, a Wrapports spokesman. Ferro was not available for comment.
The deal, completed Wednesday after the stock market closed, more than doubles the amount of cash on hand at Tribune Publishing, enabling the company to pursue strategic acquisitions and its digital transformation, according to Tribune Publishing CEO Jack Griffin. “This is a vote of confidence in our strategy and gives us further capacity to accelerate it,” Griffin said.
In 2014, Tribune Publishing acquired 38 suburban Chicago newspapers from Ferro’s Sun-Times Media for $23.5 million, and last year bought the San Diego Union-Tribune for $85 million.
Topping the list of potential acquisition targets is the Orange County Register, where Tribune Publishing is expected to bid against two other potential buyers for the assets of bankrupt California publishing company Freedom Communications.
Ferro’s technology investment track record has yielded some big returns. His investment firm Merrick Ventures bought a controlling stake in Merge Healthcare, a Chicago-based medical software company, for $20 million in 2008. Though the company did not turn a yearly profit under Ferro, he sold it in October to IBM for about $1 billion, including the assumption of debt.
His investment in the Chicago Sun-Times has yet to produce such dividends.
Wrapports bought the Sun-Times and its portfolio of suburban newspapers for about $20 million. His big plans mostly fizzled, and the newspaper and its staff have been substantially downsized amid steady losses. Investors injected an additional $70 million into the operation as of last spring.
Among the failed initiatives was Grid, a glossy Sunday business magazine launched in early 2013 that disappeared within months, along with much of the newspaper’s local business coverage, which has since been farmed out to USA Today.
In 2013, the Sun-Times directed reporters to snap photos with iPhones and fired the paper’s photographers, a move that drew national attention and became symbolic of the head winds facing the newspaper industry.
Its digital initiatives also have fallen short, notably the low-budget Sun-Times Network, an aggregated national news site resembling BuzzFeed and Gawker.
Ferro will now take a hands-off approach with the Sun-Times, stepping down as chairman of Wrapports. Veteran Chicago journalist Bruce Sagan, 87, a Wrapports board member and publisher of the Hyde Park Herald, was named chairman of Sun-Times Holdings.
Jim Kirk, Sun-Times publisher and editor-in-chief, will join Sagan on the new board overseeing the Sun-Times. John Canning, co-founder of Madison Dearborn Partners, will assume the role of chairman of Wrapports.
In an October interview on “Bloomberg Markets,” Ferro was decidedly upbeat in his assessment of journalism. “By the way, journalism has never been bigger in the world,” Ferro said. “There’s more journalists than there’s ever been. There’s more content than there’s ever been. And there’s still people wanting content. … So we think this is a great time to be a journalist, it’s a great time to be in media, and there’s a huge growth trajectory.”
Griffin said he welcomes Ferro’s investment and involvement in Tribune Publishing. “He brings vision and energy and commitment and capital,” Griffin said. “He’s a tremendous admirer of our brands at Tribune – our premium journalism, our content – so it’s a winning combination for the company.”
Tribune Publishing also announced it was suspending its quarterly cash dividend, with plans to use the savings to fund its growth strategy.