Swiss billionaire Hansjörg Wyss has dropped out of a bid to buy Tribune Publishing, but his partner in that effort remains committed to purchasing the Chicago-based newspaper chain, according to a source close to the situation.
On Friday, Wyss notified Maryland hotel executive Stewart Bainum that he was pulling out of the deal after determining his long-term plan to turn the flagship Chicago Tribune into a national publication was going to be “extremely difficult” without a large investment, the source said Saturday.
The pair had joined forces to make a fully financed $680 million bid earlier this month to buy the newspaper chain. The nonbinding proposal by an entity they formed called Newslight priced Tribune Publishing at $18.50 per share, topping a $17.25-per-share offer by hedge fund Alden Global Capital.
Newslight is currently engaged in due diligence — a detailed examination of Tribune’s financial records — a final step before making a firm offer. The source said the offer, which was expected in coming days, will be delayed while other financing is arranged.
Wyss’ exit deals a significant blow to Bainum’s effort. Tribune Publishing is expected to move forward with securing shareholder support for the Alden proposal.
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; 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.
Tim Ragones, a spokesman for the special committee of the Tribune Publishing board vetting the offers, declined to comment Saturday. Wyss did not respond to a request for comment. An Alden spokesman declined to comment.
Alden, a New York-based hedge fund and 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 deal, which values Tribune Publishing at about $633 million, requires approval from two-thirds of the other shareholders in a proxy vote to be scheduled, as well as regulatory approval.
If Tribune Publishing accepts a higher bid, Alden would have four business days to match the offer or receive a $20 million breakup fee.
Wyss, an octogenarian former CEO of medical device manufacturer Synthes who lives in Wyoming and runs a conservation foundation, teamed up with Bainum last month. On April 5, the Tribune Publishing board confirmed the Bainum-Wyss bid would reasonably be expected to lead to a “superior proposal” over Alden’s offer, pending due diligence. Wyss’ abrupt exit delays but doesn’t necessarily derail the $680 million bid, the source said.
Wyss had agreed to put up $505 million and Bainum $100 million to complete the $680 million purchase without outside financing, according to a Wednesday filing with the Securities and Exchange Commission. The Newslight proposal assumes the use of $140 million in Tribune Publishing’s cash on hand, versus $100 million in the Alden deal.
In the Wednesday regulatory filing, the special committee of the Tribune Publishing board updated the ongoing due diligence process of the Bainum-Wyss bid, but continued to endorse Alden’s offer, citing an expedited path to closing and the hedge fund’s plan to use $40 million less of the newspaper chain’s cash to complete the deal.
The chairman of Maryland-based Choice Hotels International, Bainum 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, leading Bainum to seek an exit from the deal to pursue buying all of Tribune Publishing.
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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, the source said.
As Wyss had more time to examine it, he determined his plan to turn the Chicago Tribune from a regional into a national publication like the Washington Post would require a “huge investment and a lot of effort,” the source said.
Bainum has spoken to other equity investors interested in participating and could secure more than $200 million in debt financing, the source said. The due diligence of Tribune Publishing’s finances is essentially done, which should expedite the process of securing additional financing, the source said.
Bainum remains “committed and hopeful” the deal will be completed, the source said.