This article first appeared on the DFMworkers.org on Dec. 5, 2019.
By Julie Reynolds
Dec. 5, 2019 – One week after Alden Global Capital announced it took a nearly one-third stake in Tribune Publishing, the New York hedge fund appears positioned for a full takeover of Tribune newspapers by next summer.
Alden just cut a deal with Tribune’s board to hold off acquiring any more shares until after June 30, an arrangement called a “standstill” agreement. That’s the same day another standstill agreement expires. That deal was made with the chain’s second-largest shareholder, Dr. Patrick Soon-Shiong, who owns just under a quarter of Tribune’s shares that he’ll be free to sell after June 30, kindling speculation that Alden is jockeying to buy Soon-Shiong’s shares and complete a full takeover of Tribune next year.
Tribune publishes the Chicago Tribune, The Baltimore Sun, The Hartford Courant, the New York Daily News, The Virginian-Pilot, the Daily Press, the Allentown Morning Call and others.
Alden owns the Digital First Media newspaper chain, which includes the Denver Post, San Jose Mercury News, East Bay Times, St. Paul Pioneer Press, Boston Herald and Orange County Register, among scores of other local papers.
Alden made its move late last month, when it purchased 9.07 million shares from former Tribune board chair Michael W. Ferro for around $118 million. The purchase was made by the Cayman Islands-based Alden Global Opportunities Master Fund, L.P. and Alden Global Value Recovery Master Fund, L.P., according to an SEC filing. A few days later, it acquired more shares, bringing its ownership stake to around 32 percent.
The two Alden funds listed as the actual purchasers of Ferro’s stock are among the five Alden shell companies that together own Digital First Media, now rebranded as MNG after years of critical press coverage (much of it here) apparently tainted the Digital First brand’s reputation.
In exchange for holding off on buying more Tribune stock for seven months, Alden now has two seats on Tribune’s board. Dana Goldsmith Needleman and Christopher Minnetian were appointed to the board on Dec. 2, though they will have to run for election in 2020.
In a press release, board chair David Dreier said “Tribune Publishing is pleased to add these two business professionals to our Board of Directors. The entire board believes that quality journalism is the company’s driving principle as we serve our communities and our shareholders. We look forward to working together to create new company successes.”
But neither of the Alden-approved board members has ever been a champion of journalism. Instead, both have backgrounds in real estate.
Which, if you live in a town served by a Tribune paper, is cause for concern. Alden loves to liquidate its newspapers’ real estate, selling off land, offices and printing plants to fund often risky investments in unrelated industries.
Through Alden’s subsidiary Twenty Lake Holdings, scores of Digital First newspapers have lost their real estate, long relied upon as a safety net for weathering economic ups and downs.
So who are these real estate experts Alden has placed on Tribune’s board, and why did Tribune give in to Alden’s demand for board seats so readily?
To answer the second question first, the capitulation is a strong sign Tribune’s board is terrified of Alden, and critics point out that major shareholders haven’t been offered these extra board seats in the past. Desperate for a standstill agreement, Tribune’s directors must have decided that a seven-month reprieve from the barbarians at the gate was better than no protection at all.
In Crain’s Chicago Business, writer Joe Cahill called the deal “indefensible.”
Who is Dana Goldsmith Needleman?
Here’s what Gannett board chair J. Jeffry Louis wrote about Needleman after Alden nominated her to Gannett’s board earlier this year as part of Alden’s failed attempt to take over that chain:
“Dana Goldsmith Needleman is also a director of Fred’s (a now-defunct pharmacy chain acquired by Alden), as well as a family friend of (Alden president Heath) Freeman. They have known each other for years prior to Ms. Needleman being hand-picked to serve on the Fred’s board, including through business dealings, charitable organizations, a shared alma mater and documented social gatherings. Further, Ms. Needleman’s spouse represented Alden in real estate dealings, and Ms. Needleman made a sizeable personal donation to one of their alma mater’s organizations where Mr. Freeman is chairman of the advisory board. In short, it cannot reasonably be concluded that Ms. Needleman has ‘no material relationship’ with Alden, and she is therefore NOT independent of MNG.”
Louis also noted that as Fred’s board members, Needleman, Alden president Heath Freeman and former Digital First CEO Steve Rossi “have overseen significant value destruction – with Fred’s stock declining 92% since Alden invested in December 2016, despite Fred’s operating in a steadily growing market.”
Needleman, like Freeman, is a Duke University alum. She has a law degree from Boston University and expertise in “sale-leaseback transactions,” according to a Fred’s investors’ website. (The ethics of at least one of Alden’s sale-leasebacks, apparently involving the Denver Post’s printing plant, has been questioned in court filings.)
In addition to shutting down hundreds of Fred’s stores, Alden took steps to sell all of the chain’s real estate while Needleman served on its board, and press reports indicated she was specifically brought on to help with the liquidation process.
In a July press release, Fred’s then-CEO Joseph Anto, another Alden-connected executive, said about the store closures: “While it is never easy to make decisions that impact our valued employees and customers, this initiative represents another necessary step in our continued efforts to stabilize our business by simplifying our store portfolio and product assortment.”
Of course, Fred’s did not “stabilize.” By October, all its stores closed and it was delisted from NASDAQ. The company’s demise, however, didn’t stop Anto from accepting six-figure “discretionary incentive bonuses” before departing.
Needleman, too, was paid well as Fred’s tanked, receiving nearly $200,000 in cash and stock since becoming a director in 2018, SEC filings show.
A group of Fred’s creditors was recently authorized by a federal court to obtain copies of the Dallas lease agreement and records of payments made to Fred’s Alden-affiliated executives, including Freeman, Needleman and Anto.
That case is still under way in federal bankruptcy court.
Who is Christopher Minnetian?
Minnetian is an attorney from New Jersey and since 2014 has served as president of Smith Management LLC, owned by Alden co-founder Randall Smith. He also serves on the board of directors of MNG Enterprises, Inc, the business name for Digital First Media newspapers.
In a business sense, Minnetian and Smith’s lives are intricately intertwined.
Minnetian serves as secretary to Smith’s charitable entity, the Randall and Barbara Smith Foundation, Inc., which according to its address on IRS returns, shares offices with Smith Management and Twenty Lake Holdings.
That address — the 19th floor of Manhattan’s “Lipstick Building,” where Bernie Madoff was once headquartered — is also where Randall Smith’s personal real estate investments have been mysteriously co-mingled with Twenty Lake’s mass sell-off of Digital First’s newspaper assets.
After extensive reporting on Twenty Lake by DFMworkers.org and later, the Washington Post, the company’s website no longer has any public content. But in 2016 it boasted it had sold more than 125 properties in 23 states, worth a total of $230.2 million.
Minnetian was involved in Smith’s personal real estate dealings in South Florida, where the hedge fund founder bought 16 mansions soon after Alden acquired Digital First newspapers. One of those properties, a five-bedroom spread at 180 Canterbury Lane in Palm Beach, was owned by a shell company called 180 Canterbury Lane LLC that named Minnetian as its president. The home sold last year for $10.4 million.
Minnetian is listed as an executive of Twelve Lakes, LLC, a Texas-based real estate firm headquartered in a Dallas office building owned by Randall Smith. (The building, known as Bryan Tower, is the subject of legal battles by creditors of Fred’s and Payless ShoeSource. Under Alden’s control, both companies secretly moved their offices to Smith’s building in circumstances “shrouded in suspicion,” according to court filings.)
In Randall Smith’s classic “Russian doll” style of cloaking investments in layer after layer of shell companies, Twelve Lakes LLC has mixed its real estate dealings with Alden’s Global Distressed Opportunities Fund, which sold Texas real estate through Smith’s Spire Realty Group of Dallas.
The fund has since been renamed the Alden Global Opportunities Fund LP, which is held in turn by the Cayman Islands-based Alden Global Opportunities Master Fund LP, which owns Digital First Media newspapers. The fund also made a questionable $45 million loan to a Payless ShoeSource subsidiary shortly before the retail chain went belly up. (You can find the fund’s place in Alden’s labyrinthine hierarchy here.)
Before getting involved with Alden, Minnetian worked for another hedge fund. From 2001 to 2014, he was a managing director and general counsel for Ripplewood Holdings LLC. While some credit Ripplewood with trying to save Twinkies manufacturer Hostess Brands from oblivion, others point out its executives took exorbitant salaries even as the company struggled to stay afloat.
“Perhaps the most egregious sin of Ripplewood’s oversight of Hostess was the increase in management’s compensation at the same time it was seeking to cut employee compensation,” the New York Times reported, noting that “the company’s new chief executive was paid $2,550,000, up from $750,000.”
Hostess is now largely owned by Apollo Global Management, another hedge fund that recently financed the Gannett news chain’s merger with GateHouse newspapers for $1.8 billion, a debt that critics say will force thousands of layoffs in the new company.
The debt question
It’s not clear just how much debt Digital First Media newspapers have acquired, but Alden has admitted in court documents that the chain recently took out a $200 million loan. Tribune, on the other hand, is largely debt-free because it erased much of its obligations and is “still sitting on a pile of cash” after it sold the Los Angeles Times and San Diego Union-Tribune to Soon-Shiong for $500 million.
But court records indicate Alden’s loan payment for the $200 million could be due soon, fueling speculation it might be hoping a Tribune merger could offset some of its debt. Although Alden prefers to invest in distressed companies, strip them of assets and then get out, it has held on to Digital First Media longer than some observers expected, most likely because the chain continues to be highly profitable.
Sen. Chuck Schumer, who has been critical of Alden since the Gannett takeover attempt, issued a statement saying he will be watching the hedge fund “like a hawk.”
Standing up for the Tribune-owned New York Daily News, Schumer said, “The sheer thought that some hedge fund, which believes in destroying value to make a quick buck, could send in a machete to New York’s ‘Hometown Newspaper’ should worry us all, and is why I will be watching the new (shareholders) like a hawk.”