Will New Management And Cash Save Tribune Publishing?

Tribune Publishing (TPUB), a 2014 spinoff from Tribune Media, received a large cash infusion of over $44m from Chicago entrepreneur Michael Ferro last week week in exchange for 5.2m shares. Mr. Ferro will become TPUB’s largest shareholder with ~16.6% of the shares and will join the company’s Board of Directors, replacing Eddy Hartenstein as Executive Chairman. Interestingly, Mr. Ferro is also the controlling owner of the entity which owns Chicago’s other major newspaper, the Sun-Times, but he agreed to cede operational control of that entity as part of this deal.

The plan is to use his money to pursue ‘strategic acquisitions and digital initiatives’ and help CEO Jack Griffin’s turnaround plan for the struggling publisher. Along those lines, the company also announced that it would suspend its quarterly dividend in order to further conserve cash. The timing makes sense as the company is expected to bid on the assets of the now-bankrupt Freedom Communications, whose portfolio of papers includes the Orange County Register.

The announcement didn’t seem to help the stock though, which is currently trading at a nice discount to the price Mr. Ferro paid. Despite a healthy amount of job cuts, Tribune’s financials have deteriorated over the past year and correspondingly, its share price has continued to sink lower and lower. That isn’t unusual for the publishing companies – heck, News Corp (NWSA) reported lower profit the very same day of the announcement – but, unlike most of the others, Tribune suffers from a heavy debt load, a much criticized ‘gift’ from its spinoff. Just looking at LTM September 2015, the company paid cash interest charges of over $21m or nearly half of the money it felt forced to raise while diluting its shareholders. Seems like it is operating with one hand tied behind its back. Paging Henry Waxman.

Last year, rumors swirled of  a potential LA Times sales to Eli Broad. The LA paper is one of the company’s crown jewels and largest assets. TPUB quickly squashed those reports although it did end up changing its leadership team at the paper. As this Poynter piece notes, if your plan is to become a national powerhouse, it doesn’t make a lot of sense to be selling your presence in one of the largest media properties in the world. Those kind of decisions can happen when faced with large debt payments though. Obviously, the situation isn’t that dire, but it’s worth keeping an eye on.

The print space is interesting given the dramatic changes taking place and the fact that so many different players have been set free over the past couple of years via spinoffs. Companies are opting for differing strategies – M&A, expanding business lines (ex. Gannett considering delivering packages), slimming down etc. – and it will be interesting to see what, if anything, works.

What do you think about the future of the print space?

Disclosure: Author holds no position in any stock mentioned.