Michael Ferro sells Tribune Publishing stake, prompting fears of staffing cuts

The company that owns the Chicago Tribune said Tuesday that former chairman Michael Ferro Jr. has sold his shares to Alden Global Capital, known for slashing payrolls at other newspapers it controls.

Tribune Publishing Co. said Alden purchased 9.07 million shares from Ferro and his company, Merrick Ventures, for $13 per share. The nearly $118 million purchase represents a 25.2% stake in the company and will make Alden the largest shareholder of Tribune Publishing. Its shares ended Tuesday’s trading at $9.73.

Alden will name two members of the Tribune Publishing board, which will expand from six to eight people, the company said.

Alden is a New York-based hedge fund that owns a large chain of print publications — including the Denver Post, The Mercury News of San Jose and the St. Paul Pioneer Press —called Media News Group, formerly Digital First Media. It is known for its steep cost cutting that has reduced local news coverage. Media News owns about 100 publications in all, including dailies and weeklies.

Ferro stepped down from his chairmanship of Tribune Publishing, which was then called Tronc, in 2018 just as Fortune magazine was publishing a story quoting two women accusing him of sexual harassment. However, Ferro remained Tribune Publishing’s largest shareholder.

He formerly led the Sun-Times as chairman of Wrapports. In 2017, Wrapports sold the Sun-Times and other assets to a group of unions assembled by the Chicago Federation of Labor, as well as private investors.

Ferro’s sale appears to mark a quiet exit from the media business for a man who once aspired to dominate it, especially in Chicago. Ferro, who took over the Sun-Times in 2011, handed his stake in the paper to a charitable trust in 2016 and, with funds from a cohort of business titans, took the reins of the Tribune’s corporate parent.

The next year, when his former allies at Wrapports put the Sun-Times up for sale, Ferro tried to buy it. Concerns from federal anti-trust lawyers raised a roadblock that helped the union-backed partnership acquire the Sun-Times.

Alden, meanwhile, has come under criticism from journalists’ groups, the NewsGuild labor union and even Congress for the cuts it has enforced at its publications amid steady declines in revenue. At the Denver Post, for example, journalists have said Alden slashed the newsroom headcount from 180 to 60 over six years.

The hedge fund also came under federal investigation for transferring $250 million in employee pension savings to company accounts, although it later moved the money back, according to the Washington Post.

“Alden could be a problem for Tribune. They will hold the company’s feet to the fire on profits,” said Bernie Lunzer, president of the NewsGuild. He said Alden’s typical tactic is to strip media companies of any assets it can sell, such as real estate, and use the proceeds on other ventures while starving news budgets. The union is trying to get local ownership groups to bid for Alden-owned titles.

Newsroom employees at the Chicago Tribune, now unionized under the NewsGuild’s Chicago local, took to Twitter and other social media outlets to express outrage at the sale to Alden. Tribune writer Steve Johnson called it “a final bird flip to Chicago journalism from Michael Ferro, citizen of self interest.”

A statement from the Chicago Tribune Guild said, “We are deeply concerned about Alden Global Capital’s new stake in Tribune Publishing. Alden has a well-established history of harming media institutions and journalists. Still, no matter who owns these shares, we promise to fight as hard as we can to protect our members, improve our company and serve our readers.

“We believe in journalism as a public good — a voice for the community and a safeguard against corruption. We know the value of our work, and we will defend it fiercely.’’

Reporter Michael Hawthorne tweeted, “Michael Ferro fleeced our company. Now he’s selling his shares to some hedge fund bros.”

The Chicago Tribune Guild is negotiating its first labor contract with Tribune Publishing.

Alden, controlled by Heath Freeman, could not be reached Tuesday night.

Tribune Publishing issued a statement that could indicate objections to the Alden business model. “The Tribune Publishing Board of Directors looks forward to working with Alden to enhance our company’s value as the company continues to provide valuable journalism for our customers and communities,” said board Chairman David Dreier. “Tribune is a leader in each of our eight markets providing quality, locally focused journalism. Our board believes that solid journalism enhances shareholder value and that will continue to be our driving principle.”

Tribune Publishing’s other publications include the New York Daily News, the Baltimore Sun, Orlando Sentinel and South Florida’s Sun-Sentinel.

The stock sale was reported on the same day that two other newspaper chains joined forces, promising cost cuts. GateHouse completed its $1.1 billion takeover of Gannett, with the surviving company taking the Gannett name. The newly formed company now owns 260 daily newspapers and hundreds of weeklies.

Alden tried to take over Gannett earlier this year. With media companies trying to grow to survive, Gannett approached Ferro’s Tronc in 2016. But Ferro spurned Gannett’s offer of $18 a share, higher than what he took from Alden.