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Tronc Feud Rages Over LA Times

The feud between Tronc Chairman Michael Ferro and his onetime ally, bio-tech billionaire Patrick Soon-Shiong , erupted into open warfare on Thursday — with the Los Angeles Times getting caught in the middle.

According to The NYPost, Tronc is accusing Soon-Shiong of adding to his Tronc shares with unauthorized insider trading and engaging in a media campaign to “coerce” Tronc into selling him the LA Times.

Soon-Shiong’s side claims Ferro, an early investor in Soon-Shiong’s NantHealth, is trying to get Tronc to buy back Ferro’s personal shares at a premium price.

At Tronc, Soon-Shiong is said to own 26.7 percent of the shares, second only to Ferro’s stake, which the board authorized to go as high as 30 percent.

Pat Soon-Shiong
“Dr. Soon-Shiong has repeatedly traded in [T]ronc stock without first satisfying the requirements of [T]ronc’s insider trading policy,” Tronc lawyers wrote in a letter to Quinn.

At its June 2016 IPO, NantHealth — the latest bio tech company founded by Soon-Shiong — traded at $14 a share, but has since slumped, closing Thursday at $5.42.

Soon-Shiong joined the Tronc board vice chairman last May after buying his large stake — at the invitation of Ferro.

The relationship appears to have soured during Gannett’s failed Tronc takeover. Tronc’s board refused to put Soon-Shiong up for renomination at the April 18 shareholders meeting.

The dueling letters are the latest salvos in an escalating battle within the company's board. Soon-Shiong and Ferro, Tronc's largest shareholder, have substantially increased their holdings since rival newspaper chain Gannett abandoned its hostile pursuit of Tronc in November.

Michael Ferro
At issue is a recent change in the company's rules allowing Ferro to own a larger stake than Soon-Shiong, reports The Chicago Tribune, another Tronc newspapeer.  Last month, Tronc bought back Oaktree Capital Management's remaining 3.74 million shares in the company. The stock buyback also increased both Ferro's and Soon-Shiong's stakes beyond a 25 percent ownership cap imposed by their respective initial purchase agreements last year.

On March 23, the Tronc board raised the ownership cap for Ferro to 30 percent, but did not do the same for Soon-Shiong, who subsequently wrote Tronc's attorneys over what he termed the "preferential treatment" afforded Ferro, and demanded a similar amendment to his ownership agreement.

Ferro and his affiliated companies own 9.05 million shares, which represents a 27.7 percent stake in Tronc. Soon-Shiong and his affiliated companies own 8.74 million shares, or 26.7 percent of Tronc's outstanding shares.

A technology entrepreneur who previously owned the Chicago Sun-Times, Ferro became chairman of Tronc and its largest shareholder in February 2016, when his investment firm, Merrick Ventures, bought 5.22 million newly issued shares at $8.50 each, or $44.4 million. In June, Tronc sold 4.7 million newly issued shares at $15 each, or more than $70 million, to Nant Capital, a California-based technology investment firm headed by Soon-Shiong.

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