Deals

Gillian Tan is a Bloomberg Gadfly columnist covering deals and private equity. She previously was a reporter for the Wall Street Journal. She is a qualified chartered accountant.

Should shareholders of Tribune Publishing be giving belated thanks to Rupert Murdoch? 

The 84-year-old media titan took a break from tweeting about politics over the Thanksgiving weekend to break some news about the $260 million company, which counts the Los Angeles Times and Chicago Tribune among its mastheads: Murdoch had "strong word" that Tribune Publishing would be bought by a "big Wall Street firm" while the LA Times would be split off and sold to a group including philanthropist Eli Broad. Asked by a follower if he was unhappy after submitting a losing bid, Murdoch tweeted, "No bid. No interest." 

 In response, Tribune Publishing said this in a filing Monday:

"While our policy is not to comment on rumors, given the source of this speculation and the fact that it has received considerable public attention, the Company believes a statement to employees is warranted.

As our Board of Directors noted earlier this fall and as we articulated in our November earnings call, Tribune Publishing remains committed to its strategy and transformation plan and is not engaged in discussions or a process to sell the Company.  As we finish the important fourth quarter, we appreciate the continued hard work and commitment of our employees."

Still, the stock shot as much as 13 percent to $10.50 in early trading, before paring gains to just under $10 at midday. 

Even at this higher price, the Chicago-based company, which was spun off from Tribune Media in August 2014, looks like a steal. Its price-to-earnings multiple is a mere 6, less than that of rival Gannett, and a lot lower than where the New York Times trades.

The Fine Print
Some publishers are cheaper than others.
Source: Bloomberg

Both newspaper owners could make an offer for Tribune Publishing at a roughly 40 percent premium, or about $14 a share, and have a deal be accretive to next year's earnings without factoring in any synergies, according to data compiled by Bloomberg. 

While Murdoch's tweet takes News Corp. out of the race (he's the company's executive chairman and largest shareholder), there are other potential buyers for all or some of Tribune Publishing's titles. They include Amazon's Jeff Bezos, who already owns the Washington Post, not to mention the "big Wall Street firm" Murdoch referenced, which according to Politico, is none other than Apollo Global Management. Politico noted that Tribune Publishing has been non-responsive to the New York private-equity shop, but since knowledge is power, shareholders could encourage the board into action. 

Old News
Tribune Publishing's shares have struggled since last year's spinoff.
Source: Bloomberg

Also, although $14 is a far cry from the stock's when-issued price of $25.50 at the time of last year's spinoff, it could be enough to satisfy Tribune Publishing's largest shareholder, Oaktree Capital Management, which owned debt in the former Tribune Co. through its bankruptcy. Oaktree, which holds 17.9 percent of the company, looks to be a willing seller: On Nov. 16, when the stock was trading at $8.77, the firm filed for the ability to sell that stake "from time to time in one or more offerings." 

If a deal does come to fruition thanks to Murdoch's tweet, it would mean a private-equity firm can finally try its hand at turning around a traditional media company in an era when circulation, revenue and employment are broadly declining. Earlier this year, Cerberus and Apollo were said to be among bidders for Digital First Media, the publisher of the Denver Post and San Jose Mercury News, though ultimately a deal with Apollo faltered, according to Politico. 

There's likely more ink to be spilled before this story's over. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Gillian Tan in New York at gtan129@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net