A Maryland hotel executive has committed more of his own fortune to an eleventh-hour bid for Tribune Publishing but he has one major hole to fill: No one wants to own the Chicago Tribune.
Stewart Bainum Jr., chairman of Choice Hotels, technically can mount a fully financed $680 million bid anytime before shareholders meet May 21 to vote on a deal to sell the Chicago-based newspaper chain to hedge fund Alden Global Capital for $633 million.
On Wednesday, Bainum notified a special committee of the Tribune Publishing board that he would increase his commitment to $300 million. Bainum, who wants to own The Baltimore Sun and sell the rest of the portfolio, has buyers lined up for the chain’s other titles, but not the flagship paper in Chicago, a source close to the situation said.
“We just need someone to step up for the Chicago Tribune,” the source said Friday.
In addition to the Chicago Tribune, Tribune Publishing owns The Baltimore Sun; the Hartford (Connecticut) Courant; the Orlando (Florida) Sentinel; the South Florida Sun Sentinel; the New York Daily News; the Capital Gazette in Annapolis, Maryland; The Morning Call in Allentown, Pennsylvania; the Daily Press in Newport News, Virginia; and The Virginian-Pilot in Norfolk, Virginia.
Sources said the upcoming week will likely be critical to mounting a successful bid to buy Tribune Publishing and thwart Alden, which has a reputation for sweeping layoffs at its newspaper properties.
Bainum, who is burning up the phone lines to Chicago’s wealthiest benefactors, puts his odds at about 50-50 that he will be able to submit a superior offer in time, the source said.
Alden, Tribune Publishing’s largest shareholder with a 31.6% stake, reached an agreement in February to buy the rest of the company at $17.25 per share and take it private. The proposed merger will require approval from two-thirds of Tribune Publishing’s other shareholders.
Bainum previously signed a nonbinding agreement to buy The Baltimore Sun for $65 million upon Alden’s acquisition of Tribune Publishing. That deal hit a snag last month over the terms of a transition services agreement for the Sun.
Bainum turned his attention to buying the entire company, but those efforts were dealt a blow after Swiss billionaire Hansjörg Wyss abruptly pulled out of a fully financed nonbinding offer of $18.50 per share. On April 19, Tribune Publishing ended discussions with Newslight, the investor group headed by Bainum, but left the door open for him to pursue other funding.
The Newslight partnership was premised on a long-term plan for Bainum to own The Baltimore Sun, Wyss to own the Chicago Tribune, and to sell off the rest of the company’s newspapers to individual or group owners. Bainum is sticking to that model.
“We have enough people interested in a large number of the other properties that we’re not worried about the other properties, plus they’re smaller,” the source said. “The challenge is that the Chicago Tribune essentially represents almost a third of the overall deal.”
Bainum is seeking an equity partner to commit about $200 million to his group, with at least $100 million upfront, to cover the fair market value of the Chicago Tribune, the source said.
Bainum is not the only rival bidder making a potential eleventh-hour run at Tribune Publishing.
A group led by former Sun-Times Media CEO Jeremy Halbreich has been reaching out to well-heeled Chicago investors and foundations, seeking commitments for a fully financed bid, a source familiar with the effort said Friday.
The source said Halbreich submitted a nonbinding proposal to buy Tribune Publishing for $15 a share in January, topping Alden’s initial $14.25 per share bid in December. Tribune Publishing’s investment adviser, Lazard, determined there was “a gap in equity financing” for the $15 per share offer, identified in regulatory filings as “Bidder B.”
Halbreich, who operates Dallas-based newspaper owner AIM Media, declined to comment Friday on any merger and acquisitions activity. But he said Alden’s bid undervalued the company.
“Tribune Publishing is an attractive investment and the company is worth more than $17.25 per share,” Halbreich said.
The challenge to finding a backer for the Chicago Tribune may come down to what one source called “Tribune fatigue,” a weariness among Chicago’s business and civic elite to the plight of the city’s newspaperafter years of changing ownership and financial struggles.
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A New York-based hedge fund, Alden owns about 200 publications through an operating company known as MediaNews Group. Its larger newspapers include the Denver Post, San Jose (California) Mercury News and the St. Paul (Minnesota) Pioneer Press.
In its proxy statement, Tribune Publishing has recommended shareholders approve the Alden merger. If approved, Tribune Publishing said it expects the transaction to be completed by the end of June.
Clayton Erwin, a spokesman for the special committee of the Tribune Publishing board vetting the offers, declined to comment Friday.
While Alden’s $633 million offer is fully financed, the hedge fund reserved the right to have Tribune Publishing take on up to $375 million in debt to close the deal, according to its equity commitment letter filed with the Securities and Exchange Commission.
An Alden spokesman did not respond to a request for comment Friday.