Brooke Sutherland is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.

(Updated )

It's going on a week since Gannett sweetened its takeover offer for rival Tribune Publishing, and the newspaper owner still hasn't given an official response. But reports of the companies' behind-the-scenes interactions paint a picture of ill-advised hardball.

Gannett says Tribune Chairman Michael Ferro told its executives he would only engage in a sale process if he personally gets ``a piece of the action," and wants both a large stake and a significant role (he's already Tribune's largest investor). Meanwhile, he's also reportedly talking about turning the tables and lobbing in an individual bid for Gannett, instead of agreeing to a deal that would give Tribune's holders a 99 percent premium.

Tribune says Ferro's comments were ``grossly mischaracterized and taken out of context." But this is not a good look, to say the least. The grandstanding is made even more incredible when you consider that Tribune's other major shareholder, Oaktree Capital, is getting increasingly feisty about urging sale talks with Gannett (the publisher of USA Today) and throwing shade at Tribune's rather risky plans to create value as a stand-alone company. Should Tribune continue down this path of resistance, it risks not just shareholder lawsuits, but losing its suitor altogether. It's not that hard to imagine Gannett deciding Tribune just isn't worth the headache.

Holes in the Defense
Tribune's stock had plunged 61 percent in the year before Gannett showed up. It's not clear that the company has a strategy to stem the slump on its own.
Source: Bloomberg

Tribune's marquee papers like the Chicago Tribune and Los Angeles Times would go a ways toward helping Gannett make its national platform stronger and gain leverage with advertisers. And then there are the cost-cutting opportunities, which Gannett initially pegged at $50 million, before saying savings may be even greater. But there are other newspaper companies with decent publications and expense slashing possibilities of their own.  

A.H. Belo owns the Dallas Morning News, along with a handful of more niche publications and digital-marketing assets. The company is sitting on $75 million in cash, putting its enterprise value at just $33 million, a drop in the bucket for Gannett.  Closely held Hearst also has a stable of newspapers, with titles including  the San Francisco Chronicle.  There's also McClatchy which has some bigger-market newspapers including the Miami Herald and Charlotte Observer, though the $88 million company's significant debt load could be problematic. 

Wider Circulation
Tribune Publishing isn't Gannett's only possible takeover target.
Source: Bloomberg
Enterprise values are rounded and taken as of approximately 12:45 p.m. EST on May 20, 2016.

None of these options are quite on par with the publishing heft Gannett would gain with a Tribune purchase, but one of these deals -- or a couple of them -- could tide the company over.

Should Gannett pull its bid, Tribune will lose the premium that's been baked into its share price -- and possibly then some. The company had plunged 61 percent in the year before Gannett emerged amid a downward spiral in its sales and concerns about its ability to turn a profit. First-quarter adjusted earnings per share and revenue fell short of analysts' estimates. Tribune did increase its Ebitda guidance for the year to as much as $172 million, but Macquarie analyst Matthew Brooks has called the numbers "optimistic." 

Should that cheerful outlook fail to pan out, Gannett could circle back in a few months, perhaps with a less-attractive offer and a more aggressive plan to overturn the Tribune board. Ferro and the rest of the directors would do well to consider the offer that's right in front of them now. 

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

(Updates the third paragraph with comment from Tribune that was released after publication.)

  1. Gannett actually bought A.H. Belo's TV station sister in 2013 before separating from its own TV assets last year.

To contact the author of this story:
Brooke Sutherland in New York at

To contact the editor responsible for this story:
Beth Williams at