While Gannett Co. has publicly aired its frustration over Tribune Publishing Co.’s delay in considering its $815 million acquisition offer, the owner of The Los Angeles Times and Chicago Tribune benefited from a 53-percent surge in its stock today.
Gannett — owner of publications such as USA Today, The Detroit Free Press and The Tennessean in Nashville — said its all-cash offer equating to $12.25 a share represents a 63 percent premium over Tribune’s previous stock price and would also include the assumption of about $390 million in debt.
In a letter sent to the Tribune board today, Gannett expressed disappointment with “Tribune’s continued refusal to begin constructive discussions with us.”
Chicago-based Tribune said it has hired Goldman, Sachs & Co., Lazard and Kirkland & Ellis as its financial and legal advisors to review the offer. A spokesman for Tribune gave no specific time frame for the process.
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Consolidation is a constant theme in the newspaper industry. Even after a number of congolomerates restructured and spun off their print assets from their media holdings, the challenge to balance declining revenue with rising costs has been difficult.
“Now what you see is the second set of these newspaper assets continues to struggle, as readership has moved online,” said Joe Cornell, the chief executive officer of Spin-Off Research in Chicago, who followed Tribune closely prior to its separation from Tribune Media Co. two years ago. “It makes sense that there would be some consolidation with the players that are left.”
Tribune’s own $56 million winning cash bid for Orange County Register parent Freedom Communications Inc. in a bankruptcy auction earlier this year was immediately met with opposition by the U.S. Department of Justice in a deal the U.S. government said would create a Southern California newspaper monopoly. Freedom ultimately went to Digital First Media in a deal approved by a bankruptcy court judge in March.
Gannett’s play for Tribune continues its ongoing pursuit of consolidation and content. Last October, the McLean, Va.-based company acquired Journal Media Group, the owner of The Milwaukee Journal Sentinel, for $280 million. Two months later, Gannett hired Joanne Lipman, the former deputy managing editor of The Wall Street Journal and founding editor of Conde Nast’s now defunct Portfolio magazine, as chief content officer to oversee its more than 92 news organizations.
According to Gannett, its president and ceo, Robert Dickey, made the proposal to Tribune’s board in a letter dated April 12. Since then, Dickey discussed the topic in several phone discussions with Justin Dearborn, Tribune’s president and ceo, and Michael Ferro, Tribune’s largest shareholder and chairman, Gannett said.
In the case of Tribune, “I wouldn’t be surprised if they drag their feet because they maybe can get another party involved,” Cornell said. He noted that one potential person could be billionaire Eli Broad, who had been rumored to be interested in buying The L.A. Times. “They might be thinking there might be another party interested in the assets and get a better price for the shareholders.”
Through a spokeswoman, Broad declined to comment.
Now Gannett aims to grow its own media network with its run at Tribune, arguing its deal would create about $50 million a year in synergies. It would also grow USA Today’s newspaper network, said Gannett chairman John Jeffry Louis.
“We believe Tribune shares the new Gannett’s unwavering commitment to journalistic excellence and delivering superior content on all platforms,” Dickey said. “In this respect, the proposed combination of Gannett and Tribune would bring together two highly complementary organizations with a shared goal of providing trusted, premium content for the readers and communities we serve. We are confident that a combined Gannett and Tribune would add value for stakeholders of both companies as we work together to foster deep and vital connections among the members of our communities, provide excellent solutions for our business partners and drive value for our stockholders.”
Gannett ended its letter to the Tribune board hinting at other methods should the board choose not to discuss the bid.
“Continuing to refuse to engage in a dialogue with us will only serve to delay the ability of your stockholders to receive the value represented by our all-cash offer,” today’s letter to the Tribune board read. “We therefore are prepared to consider all alternatives to complete this transaction.”
Under a new team led by Dearborn and Ferro, Tribune has been emphasizing what it describes as “a content-first strategy,” driven by big data and artificial intelligence technology, in an effort to offset declining advertising revenue. Tribune swung to a net loss of $77,000 in the fourth quarter of 2015 from net income of $15.5 million a year ago. Although boosted by higher circulation revenue, total sales were relatively flat, increasing to $461.8 million from $457.5 million from a year ago.
It’s been making the most of its financial and journalistic resources. The L.A. Times lost its longtime fashion critic Booth Moore in a round of buyouts last year but won a Pulitzer Prize earlier this month for its coverage of the San Bernardino mass shooting. Tribune also has a syndication deal with Penske Media Corp. to distribute issues of WWD and Footwear News from its Fairchild Fashion division to select subscribers across Tribune’s newspaper portfolio and also to post WWD’s stories on latimes.com.
After Gannett revealed its bid on Monday morning, Tribune’s stock surged 53 percent to close at $11.50 that afternoon from $7.52 on Friday. Wall Street’s positive response indicates that marquee names such as the Tribune and Los Angeles Times certainly have value.
“Even despite having the economic problems in the industry itself, there is always going to be someone interested in those assets,” Cornell said.