IBM International Business Machines Corp

Tribune Publishing Co., owner of the Los Angeles Times and Chicago Tribune, has secured a substantial cash infusion from a private investor and cancelled its dividend payment following a difficult year in which its stock price tumbled 60%.

Merrick Media LLC, which is owned by Chicago-based investor Michael W. Ferro Jr., has acquired 5.2 million newly issued shares of Tribune Publishing for $44.4 million, Tribune Publishing announced Thursday. Merrick is now the largest single shareholder with 16.6% of the company's shares.

Mr. Ferro, 49, will become Tribune Publishing's nonexecutive chairman, replacing Eddy Hartenstein, who will become a regular member of the board.

The newspaper publisher said the private placement will bolster its ability to fund acquisitions and digital strategies. The company also announced that its board had voted to suspend its quarterly dividend in order to maintain flexibility while funding its growth strategy.

"This gives us significant latitude and financial flexibility to pursue our acquisition strategy as we continue to invest in digital initiatives and transform the company," Tribune Publishing Chief Executive Jack Griffin said in an interview.

The investment comes ahead of a bankruptcy auction next month for the holdings of Freedom Communications Inc., owner of the Orange County Register and several other southern California newspapers in which Tribune Publishing has expressed keen interest. Last year, Tribune Publishing acquired the San Diego Union-Tribune and a handful of weeklies in southern California for $85 million as an addition to the Los Angeles Times.

Tribune Publishing was spun off in late 2014 as a separate company from broadcast holdings that became Tribune Media, less than two years after their predecessor company emerged from bankruptcy.

Tribune Publishing, with its geographically disparate holdings, has since had difficulty finding its footing in a market where many large media groups have moved toward operating regionally integrated clusters of newspapers.

Since the spinoff, Tribune Publishing's stock has fallen from $24.50 a share to $9 as of Wednesday, reducing the company's market value to about $236 million. Merrick paid approximately $8.54 a share for its stake.

Mr. Ferro, who sold his health records and imaging company, Merge Healthcare to IBM in October for $1 billion, will step down as chairman of Wrapports LLC, owner of the Chicago Sun-Times but will maintain his equity stake there.

Cancelling the dividend, which paid out 70 cents a share annually, will save Tribune Publishing about $18 million a year. The company still plans to pay out the dividend due next week.

Several of its largest shareholders coming out of the spinoff, such as investment firms Oaktree Capital and Angelo Gordon, had been debt holders of the original company and have made moves to sell their stakes. Angelo Gordon has since exited the company. In November, Tribune disclosed in a regulatory filing that Oaktree, its then-largest shareholder, was prepared to sell some or all of it stake. It is not immediately clear what shares, if any, Oaktree still holds.

Last summer, Tribune Publishing rejected overtures from philanthropist Eli Broad and private equity-firm Apollo Global Management to sell the Los Angeles Times, its largest revenue generator. The process led to the ugly firing of the paper's publisher, Austin Beutner, and elicited a letter from at least one major shareholder to the board urging it to break up the company or move to make it private.

Tribune Publishing has reported declining year-on-year revenues in almost every quarter since the spinoff as it struggles with a sharp industrywide fall-off in advertising dollars as readers and marketers migrate online.

Ahead of its scheduled earnings report in early March, Tribune Publishing released preliminary financial data for 2015. It said revenue is expected to be between $1.66 billion to $1.67 billion for the year and adjusted EBITDA is expected to be between $154 million to $157 million. It also said the company ended the year with $41 million in cash.

The company had downgraded its guidance late in 2015, estimating revenue at between $1.645 billion and $1.675 billion, down from $1.67 billion and $1.7 billion. It also lowered its adjusted EBITDA estimate to between $145 million and $160 million from between $165 million and $175 million.

Write to Lukas I. Alpert at lukas.alpert@wsj.com

(END) Dow Jones Newswires

February 04, 2016 08:55 ET (13:55 GMT)

International Business M... (NYSE:IBM)
Historical Stock Chart
From Mar 2024 to Apr 2024

International Business M... (NYSE:IBM)
Historical Stock Chart
From Apr 2023 to Apr 2024