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.


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