Ferro firm buys $44.4 million stake in Tribune Publishing

Michael W. Ferro Jr., the majority owner of the Chicago Sun-Times’ parent company, has significantly expanded his media holdings without straying far from home.

In an unusual transaction, a company led by Ferro has bought a 16.6 percent stake in Sun-Times’ rival Tribune Publishing for $44.4 million, a move that will make his firm Tribune’s single-largest shareholder and shift his office out of the Sun-Times building.

Ferro, 49, will become non-executive chairman of Tribune, the publicly traded company whose publications include the Chicago Tribune, Los Angeles Times and nine other daily newspapers.

Ferro bought 5.22 million shares of newly issued Tribune stock in a private placement transaction through Merrick Media LLC, a private-equity firm he controls, according to a Tribune statement released Thursday. Tribune Publishing stock closed Thursday at $7.98, down $1.02 or 11.33 percent.

Under the terms of the agreement, Ferro’s company can’t own more than 25 percent of Tribune stock nor can it sell any stock for three years.

Ferro will retain his majority investment stake in Wrapports, the Sun-Times’ parent company. But he will step down as Wrapports’ chairman and cede all control of the Sun-Times and affiliated companies, including the Chicago Reader and Aggrego, a national network of online-only publications. The Chicago Tribune and Sun-Times will continue to operate independently.

Ferro — who led the acquisition of the Sun-Times in 2011 after the death of late Sun-Times owner James Tyree — moved out of the Sun-Times building on Wednesday. He is expected to move into Tribune Tower, which is up for sale. Tribune Publishing has been leasing space in the building from Tribune Media, which spun its print-based media holdings into a separate company in 2014.

Shares of Tribune stock have traded for as high as $21.94 and as low as $7.03 over the past year.

It is unclear if Ferro’s company’s transaction will draw scrutiny from federal regulators since he will be involved in ownership of Chicago’s two largest newspapers.

The Sun-Times pays Tribune to print and deliver its daily editions. Tribune in 2014 bought dozens of suburban newspapers from Wrapports.

In the wake of Ferro’s departure from Sun-Times operations, Bruce Sagan, who founded the Daily Southtown and now is publisher of the Hyde Park Herald, will chair the board of the company overseeing the newspaper.

Joining Sagan on the board will be Sun-Times publisher and editor-in-chief Jim Kirk, Sun-Times general manager Paul Pham, Erik Hammer, an executive with Wrapports, and Richard Krieberg, Wrapports’ chief financial officer.

“It has been a pleasure to serve on the board of Wrapports and to be a part of the turnaround of the iconic Chicago Sun-Times brand,” Sagan said in a statement. “I look forward to continuing to spread the Chicago Sun-Times brand of journalism and to continue deepening our relationship with our readers in print, online and mobile.”

John A. Canning, Jr., chairman and co-founder of Madison-Dearborn Partners LLC, will assume the role of chairman of the board of Wrapports.

Ferro, a technology entrepreneur, founded Click Commerce, a software company that sold for nearly $300 million in 2006. He also was chairman of Merge Healthcare, a medical imaging and technology company that IBM recently purchased for a reported $1 billion.

In a statement about the Tribune purchase, Ferro said: “I am excited to be working with the company’s award-winning brands. I see tremendous upside to create value and put Tribune Publishing at the forefront of technology and content to benefit journalists and shareholders.”

While Ferro will become non-executive chairman of Tribune, Eddy W. Hartenstein, who had served in that capacity, will remain on the board.

Tribune Publishing CEO Jack Griffin said in a statement that the transaction “supports key elements of our ongoing strategic plan and provides our company with additional capital to accelerate our growth strategies. We continue to evaluate growth opportunities where we can achieve measurable, value-enhancing synergies that drive financial contribution and maximize shareholder value.”