In rebuffing Gannett Co.’s unsolicited $425 million acquisition offer – since sweetened to $479 million – Tribune Publishing Co. has pushed the envelope on acceptable corporate governance practices.

“The rules about how to respond to an unsolicited offer are very clear,” said Nell Minow, a corporate governance expert at ValueEdge Advisors in Washington, D.C. “It’s almost like a recipe you have to follow.”

After receiving a fully financed offer – especially one at a healthy premium over the current stock price – the board of a public company should convene an outside committee of independent advisers, along with an investment banker, to evaluate the offer and, potentially, solicit others.

“This process assures the shareholder that you’re looking out for their interests,” Minow said. “What you’re not allowed to do is say, This isn’t for sale. Because it’s already been sold; it’s been sold to shareholders.”

Gannett’s initial bid for Tribune, at $12.25 a share, came in on April 25. At the time, the Chicago-based parent of the Los Angeles Times was trading at around $7.50. Its board, led by new Chairman Michael Ferro, unanimously rejected the offer at a May 4 meeting. In response, Gannett revised its bid up to $15 a share, a bid, including debt, that had an overall value of $864 million.

“Gannett is flexing its muscle, saying it’s going to be the only bidder,” said Hamed Khorsand, a media analyst at Woodland Hills-based BWS Financial Inc. “It puts a very high premium on Tribune.”

But Tribune, led by Ferro, is holding firm on its resistance, an attitude that’s unusual given Tribune’s current valuation, said Khorsand.

The resistance persists in the face of pressure on the board from Tribune’s second-largest shareholder, downtown L.A. investment firm Oaktree Capital Management, to explore a potential deal.

“In my opinion, this approach makes them very vulnerable for a lawsuit from the shareholders or from Gannett,” said Minow.

Lay of the land

Tribune’s two largest outside shareholders, Oaktree and Pasadena’s Primecap Management, together control 27 percent of the company (Ferro’s Merrick Media paid $44.4 million for a 16 percent stake in February).

Other notable shareholders include Mount Flag Media Investment, based in Dana Point, which acquired a 5 percent interest in the company in October, and New York-based BlackRock Inc., which also owns about 5 percent.

None of the investors would comment on the Gannett offer.

But Oaktree has been firm in its desire to have the board consider the Gannett offer.

“We have not seen anything to give us any confidence that Tribune on its own, with the resources and competitive position it has today, can achieve over any reasonable period of time the value for shareholders that we believe can likely be achieved through a transaction with Gannett,” Oaktree Vice Chairman John B. Frank wrote in a May 18 letter to the board. “We see very substantial risk that through pursuing an independent course, Tribune will destroy enormous shareholder value.”

He noted that Oaktree met with Ferro and “listened to his ideas about building value as a standalone company through a digital transformation of Tribune.” Oaktree came away unconvinced.

“Our conclusion is that we are convinced that you and Tribune’s management should engage Gannett immediately and seek to negotiate a transaction in the interest of all Tribune shareholders,” Frank wrote.

Until last week, such appeals had fallen on deaf ears. The Tribune board adopted a shareholders’ rights measure – the “poison pill” – on May 9. The move would authorize the company to flood the market with new shares under certain conditions, dilute the value of the stock and make it more expensive for an unwanted investor to take control.

“I think it’s a pretty exceptional offer,” Nicco Mele, former deputy publisher of the Times, said of the revised bid. “I don’t think it’s even been 90 days yet since Ferro and his team took over, so I think they’re still just trying to figure the business out.”

Gannett believes its recently formed USA Today Network “would seamlessly extend to Tribune and benefit all Tribune and Gannett stakeholders” while maintaining a “focus on producing high-quality, local and national content,” according to Robert J. Dickey, its chief executive.

Another option would be for Ferro essentially to buy the ailing publishing company himself at a higher price than Gannett is offering, making Tribune a privately held company.

“He’s treating it like a private company right now,” said Minow. “He either needs to treat it like a public company or make it private.”

Tribune, which said the initial Gannett offer was an attempt to “steal” the company, now said it is in consultation with its financial and legal advisers and would thoroughly review Gannett’s revised proposal.