M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Tuesday, October 22, 2013

TRO Halts Globe Sale

Uh-oh... a crisis just a day before the World Series!  As you may remember, the NY Times agreed to sell its Boston Globe division to John Henry, the principal owner of the Red Sox.  Owning the local newspapers, obviously, makes for excellent coverage when it comes October and your team IS PLAYING IN THE WORLD SERIES.  So, you'd think everybody in Massachusetts would be on board.  Apparently, there are some Yankee fans in central Mass who disagree.  A judge today issued a TRO halting the sale

"The defendant ... is hereby enjoined and restrained from transferring ownership or interest in any of its assets... until further order of this court," Judge Frison wrote in her temporary restraining order. "The court retains the prerogative to inspect the financial documents of the defendant in order to resolve any disputes." 

In her temporary restraining order, Judge Frison put the "maximum end" of a settlement in the case at $60 million. In essence, the entire sale price of The New England Media Group could be set aside in an escrow account until the case is completed. The case has been in litigation since 2009. 

The New York Times Co. and Mr. Henry had scheduled to close their reported $70 million sale of The New England Media Group — which includes the Globe, the Telegram, boston.com, and telegram.com — to Mr. Henry on Friday, according to Judge Frison's restraining order. 

The issue here is who will be liable for the costs in a potential settlement of litigation against the Worcester Telegram and Gazette and independent newspaper carriers that has been ongoing since 2009.   The carriers are seeking to be treated as employees and not independent contractors.  The carriers want access to the NY Times' assets in the event they get a judgment or settlement.  They fear that following the sale to John Henry, one of the richest men in America, that Worcester Telegram and its parent will be left without sufficient assets to pay a settlement should it be reached.  The Times, obviously, wants to leave this particular liability with its Worcester subsidiary.

Although the question of which assets and liabilities will move in an asset purchase is often a difficult one, this one seems a little more straightforward.  The Times sold its New England Media Group entity to Henry. That holding company includes the T&G as well as the Globe entitities.  The present suit against the T&G corporate entity gets transferred along with entity.  Absent facts that might suggest T&G has been deliberated undercapitalized to perpetuate a fraud against the carriers why does the TRO issue?  In any event, does anyone really believe that the Times is in a better financial condition to make good on any judgment than John Henry? 




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