Nieman Foundation at Harvard
Tronc doesn’t do anything by the book.
Even as much of the company’s turbulence looks to be clearing, new questions are emerging about who will next lead the big metro chain.
Softbank and Apollo Global Management have reportedly expressed real interest in buying the company, but much more likely is the reemergence of one of the many characters who have have upended business as usual in the roiled daily newspaper industry. Tronc’s newspapers, staff, and readers may soon be subject to a whole new round of strategic rethinks and re-deployments.
The sale looked like a homecoming story: A McCormick had bought back into the Chicago Tribune’s parent company, Tronc. Sargent McCormick, described as a distant relation of the kin of Colonel Robert McCormick — whose tenure defined the Trib historically — was the buyer.
In the releases, Sargent McCormick’s name was prominent as Michael Ferro pulled his latest (final?) rabbit out of the hat ten days ago. As we learned that McCormick Media had paid an outsized 34 percent premium of $23 a share for the 25.4 percent stake in Tronc, it was a storyline that made historical sense: Despite all the tribulations of the Tribune Company, Tribune Publishing, and Tronc, the old Trib was returning to the warm embrace of Col. Robert McCormick’s heirs, safeguarding the civic asset.
But since then, here’s been no interview published in the Chicago Tribune itself about its new hometown buyer. So far, Sargent McCormick — a distant relative in the McCormick family, but the one who’s writing a family history of its International Harvester company roots of fortune — has apparently only talked to Lynne Marek of Crains Chicago Business.
McCormick told Marek he hopes the Trib can “capture, reclaim its notions of truth and trustworthiness.” But “about halfway through his interview…McCormick expressed surprise that his comments might be used in a news report. Earlier in the interview, he said in a lighthearted tone that he was finding out, presumably because of the media interest swirling around his proposed Tronc stake purchase, that reporters are like ‘spies.'” That may have been a joke, or it may raise questions about his understanding of the major stake in a major metro chain he just bought.
He said his family is “very excited” about the transaction and that he was sorry he couldn’t talk more about it yet. When he has “permission,” he said he’d be happy to be more transparent about the deal and any partners.
The partners, too, have been quiet publicly.
“That John Lynch?”
Those with good memories of the recent shifting sands of newspaper ownership will remember one of those partner names: John Lynch. As word of his involvement in the “McCormick Media” deal has increased, people have asked, “That John Lynch?” (This deal’s John Lynch is the father of John Lynch, the San Francisco 49ers general manager.)
In fact, Lynch is the first named buyer in the purchase agreement that Merrick Media filed with the Securities and Exchange Commission: John Lynch, Sargent McCormick, and Clancy Woods. Lynch served as developer Doug Manchester’s right-hand man for much of the time that Manchester owned the San Diego Union-Tribune; in 2015, Manchester sold the paper to Tribune Publishing, which a year later became Tronc. (More recently, Manchester, on the brink of being nominated as Trump’s ambassador to the Bahamas, saw his appointment derailed by sexual harassment claims.)
Following those allegations, current Union-Tribune editor-in-chief and publisher Jeff Light said in a story published in the U-T: “My take on the Manchester years was that he hired some people of low competence, and in some cases low character, I think, who damaged the U-T and damaged Manchester’s reputation and squandered the business opportunity. I will say that when they were gone, my experience dealing with him directly, I did not have any problems with him and I did not see him as some sort of Weinstein-like figure in any way.”
During that Manchester/Lynch tenure, the U-T (which ownership renamed U-T San Diego, a nod to its digital future, a move that Tribune Publishing later reversed) saw controversy after controversy. “Papa Doug,” as he insisted most people (even his peers) call him, cut quite a trail.
Ownership saw a thin line between Manchester’s major local development interests and the paper’s editorial mission. Concludes one observer, “It put a stain on the U-T.”
As CEO from 2011 to 2014, Lynch — who has Chicago roots — led efforts to transform the paper. He led a brief but big effort at news video, which won a fair amount of attention in its short life, in the press press.
John Lynch has earned a mixed reputation in San Diego. Even as he can point to career achievements, his own money management woes have been written about (here’s Lynch’s response).
“McCormick needs to do his homework,” an executive at one of the companies with which Lynch has been associated told me. “If they are trusting John, then they’re making a big mistake.”
Reached in San Diego on Monday, Lynch replied to me that “we are not talking to the press until we go through regulatory issues.” That regulatory review isn’t likely to stop the deal, for which the purchase agreement specifies a May 15 deadline.
My efforts to reach Sargent McCormick have been unsuccessful. Tronc declined to comment.
Consequently, we’re left with more questions than answers. Though early attention focused on the Chicago Tribune itself, Lynch’s involvement suggests a wider interest in all of Tronc’s chain properties, post–Soon-Shiong sale.
In the year before Doug Manchester sold the U-T to Tribune, Manchester, Lynch, and Soon-Shiong tried to buy more newspapers. First, they set their sights on the Orange County Register, then failing and later to be bought by Digital First Media. Unable to make that deal work, say sources, they aimed for bigger prey. The buying effort failed, and Manchester became a seller rather than a buyer.
Given that history, Lynch may well want to run the chain. If so, we’ll probably see a new direction for Tronc (if it keeps that name). What would happen to the recent transformation strategies headed by Tim Knight and to the executive corps built over the last 18 months? Would we see a new Tronc pivot to digital video, given the broadcast backgrounds of Lynch and Woods? It’s anyone’s guess, as, predictably, CEO Justin Dearborn would be likely to exit quickly.
How likely a scenario is that? McCormick Media is buying the Ferro-controlled 25.4 percent share in Tronc. That stake has meant control of the company in every aspect of the business. Ferro had controlled the board; according to the documents filed so far, it’s unclear whether McCormick Media would assume a similar dominance. Even after Soon-Shiong buys the southern California newspapers, he’ll have a 24 percent stake in Tronc himself. Together, they’d certainly have an effective majority.
Of course, the buyers may have other plans. They could sell some Tronc properties — or become buyers, presumably fueled by McCormick money.
Those plans, though, are unlikely to include the two big names mentioned in recent press reports. You may have read those stories about Softbank and Apollo Global Management lusting after Tronc. In those reports, it hasn’t been clear whether that reported interest would kick in before or after the Merrick Media/McCormick deal. Sources close to the action tell me they haven’t seen any displays of real interest, though it’s possible non-disclosure agreements have been signed.
In addition, there’s the financial reality. Apollo’s deal to buy Digital First Media three years ago foundered on a valuation that was less than half of what McCormick Media is paying Ferro. So it seems unlikely that any other buyer would displace this deal.
Further, there’s the non-monetary rationale beyond a mere$100 million in profits that Merrick investors will take home.
Merrick’s investors want out — and want separation from their investment champion Ferro. The who’s-who of Chicago’s elite has made a good money of money investing with Ferro over the years, from Merge Healthcare to Tronc, but the recent sexual harassment charges against him have unnerved them.
One source said Ferro is “holed up in Florida.” If he is, it’s with the $5 million he received in January as part of a new “consulting” contract. His next payment (the contract continues at this point) is due in January 2019.
The pain of “transition”
In Los Angeles, Soon-Shiong had been expected to close his close-to-$600 million deal for the Los Angeles Times and San Diego Union-Tribune by now. That expectation had been set by Tronc itself and others involved in the agreement.
Sources say that the deal will soon close and that it’s been held up due to the nitty-gritty of a transition services agreement that has stalled final signatures.
In short, Soon-Shiong wants to emerge from the signing as independent of Michael Ferro and Tronc as he can. As he told staff about the company’s planned major move to a modern, built-for-digital media office park, he wants to establish the Times as a new, revitalized independent voice.
It will be a massive transition away from Tronc’s technology, affecting ad, circulation, content, financial, human resources, and other platforms. Almost all of Tronc’s top executives go with the mothership.
Soon-Shiong continues to meet confidentially with a number of the news industry’s top change agents. These publishers share what has worked for them and what hasn’t. It’s still unclear whether he’ll act as his own publisher, but he understands what a big statement his hiring of the Times’ next editor will make.
Could the Times rocket from digital laggard to the national news elite, as Jeff Bezos has made possible with the Washington Post? It’s possible, with a lot of lost (Tribune Publishing, Tronc) time to make up. Stealing away a top editor would make that statement — and could be the first step in attracting a new generation of talent to LA.
In any event, the Tronc, or post-Tronc story, no longer threatens to disappear, but rather to divide into two 2018 storylines to follow.
