Biotech billionaire buys Los Angeles Times for $500 million
LOS ANGELES — Biotech billionaire Patrick Soon-Shiong has agreed to purchase the Los Angeles Times from its parent company, Tronc, restoring local ownership and perhaps ending a turbulent period for the storied 136-year-old institution.
Chicago-based Tronc on Wednesday announced the sale of The Times, the San Diego Union-Tribune and the Spanish-language Hoy to Soon-Shiong’s investment firm Nant Capital for $500 million in cash. In addition to the purchase price, the deal includes the assumption of $90 million in pension liabilities.
“We look forward to continuing the great tradition of award-winning journalism carried out by the reporters and editors of the Los Angeles Times, the San Diego Union-Tribune and the other California News Group titles,” Soon-Shiong said in a statement.
Tronc also announced that it will form a new division called Tribune Interactive, which will be led by Los Angeles Times Publisher Ross Levinsohn. The company said that an independent investigation into allegations of sexual harassment at previous companies found “no wrongdoing” by Levinsohn, who has been on unpaid leave since Jan. 19.
Tronc’s stock price leaped after the deal was announced, closing up 19 percent at $21.55.
The sale, which is expected to close in March or April, comes after a particularly stormy period for the newspaper, which has seen three editors in six months, its publisher placed on unpaid leave amid a sexual harassment investigation, and a historic vote to unionize the newsroom.
The deal came together quickly, over the last few days, and took many observers by surprise. Tronc had fended off previous efforts to buy the company outright or peel off the California newspapers. Tronc had insisted that The Times was key to its growth strategy given its proximity to Hollywood, technology hubs and the Pacific Rim.
But, amid the ongoing drama at The Times — including escalating hostilities between the newsroom staff and its short-lived editor-in-chief, Lewis D’Vorkin, Tronc’s chairman Michael Ferro reassessed the company’s strategy for The Times.
Ferro came up with a number — $500 million — and decided that if he could fetch that price for The Times and the Union-Tribune, then it was the right time to sell. It’s unclear who made the first overture, but talks began less than a week ago and reached a fever pitch over the weekend. That’s when the outlines of a deal came together.
“This was a fairly efficient process,” said Dennis Culloton, spokesman for Ferro. “Michael’s career leading public companies has been marked by one thing — increasing value for shareholders. And when there was an opportunity to get this kind of a price, he determined that it was a great opportunity to bring enormous value to shareholders and the company.”
By agreeing to the nearly $500-million price tag, Soon-Shiong is paying a rich premium for the struggling media properties. Traditional publications have fallen out of favor on Wall Street amid plummeting print advertising revenue. Marketers have been steering their ad dollars to Facebook, Google, Snapchat and other sites and away from magazines and newspapers.
One of Los Angeles’ wealthiest residents and a minority owner of the Lakers, Soon-Shiong became the latest billionaire to throw a lifeline to a major newspaper. Amazon founder Jeff Bezos bought the Washington Post in 2013. That same year, Red Sox owner John Henry scooped up the Boston Globe and, in 2014, Minnesota billionaire and Timberwolves owner Glen Taylor bought the Minneapolis Star-Tribune.
As a local, Soon-Shiong will likely face high expectations — both from the battered newsroom and the Southern California community, which has witnessed the closure of a bilingual chain of Eastside newspapers, the abrupt shutdown of sites LAist and Gothamist, the gutting of the L.A. Weekly under secretive new owners and significant staff cuts at the chain that owns the Los Angeles Daily News.
In a statement posted on its website, the organizing committee behind The Times’ recent union drive congratulated Soon-Shiong on the deal.
“Our readers expect and deserve the high-quality, independent journalism that has defined The Times for decades,” the committee wrote. “The L.A. Times Guild looks forward to working with a local owner who can help us preserve The Times as a guardian of our community and as the voice of the American West.”
Russell Goldsmith, chief executive of downtown L.A’s City National Bank and chairman of the Los Angeles Coalition for the Economy and Jobs, said he hopes Soon-Shiong’s purchase of The Times will be followed by additional investment in the newspaper.
“I think The Times has been struggling through a downward spiral of resources and staff, as well as excessive turmoil,” he said. “I think Patrick has the opportunity to both bring stability and continuity, and an commitment to the long-term well-being of the community. Greater resources, greater coverage and increased staff will result in coverage that will attract more readers.”
At the same time, Tronc and other publishing companies have struggled to boost revenue from the readers they attract online.
For Tronc, the sale of its most prominent property marks a retrenchment. The company is expected to use the $500 million in proceeds to pay down debt and further its digital strategy across the remaining papers, which include the Chicago Tribune, Orlando Sentinel, South Florida Sun-Sentinel, Baltimore Sun and the New York Daily News.
“We are pleased to transition leadership of the Los Angeles Times and the San Diego Union-Tribune to local ownership, and we are certain that the journalistic excellence in Southern California will continue long into the future,” Justin Dearborn, chief executive of Tronc, said in the statement.
“This transaction allows us to fully repay our outstanding debt, significantly lower our pension liabilities and have a substantial cash position following the close of the transaction,” he said. “We will have a versatile balance sheet that will enable us to be even more aggressive in executing on our growth strategy as a leading player in news and digital media.”
Dearborn said Chris Argentieri will resume his role as general manager of the California News Group and work with Soon-Shiong on the planning. Other key executives will also continue in their current roles: Jim Kirk as editor-in-chief of The Times and Jeff Light as publisher and editor of the San Diego newspaper.
As part of its newly formed Tribune Interactive, Dearborn said Tronc will “continue to build the future of the company through product and digital content innovations and distribution initiatives, as well as strategic partnerships and acquisitions to accelerate growth.”
Mickie Rosen, the L.A. Times president, will serve as president of the new company under Levinsohn. D’Vorkin, who was abruptly replaced last week as editor-in-chief of The Times, will be its chief content officer. The company will be based in Chicago, with offices in New York and Los Angeles.
“We are pleased that Ross will be back to work,” Dearborn said in the statement. “We have great confidence in him and the team to deliver value for our shareholders through growing digital audiences for our award-winning journalism, new creative content and product initiatives, and growing digital and diversified revenue streams.”
The Times has long had a strained relationship with its Chicago-based corporate parent.
For more than a century, The Times was owned by the same family. Harrison Gray Otis gained ownership of the paper in 1884 and he served as publisher until 1917. His descendants, the Chandler family, controlled the Times Mirror Co. until the 2000 sale to Chicago-based Tribune Co.
Soon after, changes in news consumption began to erode the business, and Tribune’s leaders were under pressure to sell. In 2007, Tribune sold itself to Chicago real estate investor Sam Zell in a costly leveraged buyout that left the company drowning in debt. Within a year, Tribune filed for Chapter 11 bankruptcy protection.
The company emerged from bankruptcy on Dec. 31, 2012, with a consortium of wealthy investors in control. Two years later, the board split the company. One group, Tribune Media, was made up of television stations, including KTBC-TV Channel 5 in Los Angeles, a stake in the Food Channel and real estate holdings, including The Times’ downtown L.A. headquarters.
The second company, Tribune Publishing, housed the newspapers, including The Times.
But the turmoil continued. Tribune Publishing’s first chief executive, Jack Griffin, in 2015 ousted The Times’ publisher, Austin Beutner, who was trying to build the paper into a civic square for Los Angeles and surrounding communities.
Griffin himself was sacked a few months later after he brought in Ferro, a Chicago investor and then-owner of the Chicago Sun-Times. Ferro installed Justin Dearborn as CEO, and they renamed the company Tronc. Last summer, Dearborn fired a handful of top Times editors, including the previous publisher/editor, Davan Maharaj. He then hired Levinsohn, who was placed on unpaid leave in January after National Public Radio reported that he was a defendant in two sexual harassment suits before he joined The Times.
The San Diego paper has experienced its own upheaval and ownership changes. The Union-Tribune, which is celebrating its 150th anniversary this year, was owned by the Copley family until it was sold to Platinum Equity, a Los Angeles investment firm, in 2009 for an undisclosed sum that was estimated at $50 million or more.
San Diego developer Douglas F. Manchester bought the paper for $110 million in 2012. Three years later, he sold its Mission Valley buildings to local developers for $50 million and its publishing business for $85 million to Tribune Publishing.
Light, the Union-Tribune’s publisher and editor, called the Soon-Shiong deal “a terrific outcome.”
“I see opportunity for us on the business side and, more importantly, in our journalism,” he said.
The Union-Tribune employs about 260 people, down from nearly 2,000 under the Copleys. Most of the downsizing has come from outsourcing of printing, packaging and distribution, but the news and advertising departments have experienced layoffs as well.
San Diego Union-Tribune staff writer Roger Showley contributed to this report.
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