Gannett Terminates Talks to Buy Tronc

  • Handshake agreement said to collapse with lack of financing
  • Few other publicly traded newspaper companies available

Gannett Bid for Tronc Ends on Lack of Financing

Gannett Co. dropped its $683 million bid for rival Tronc Inc. after financing fell through, ending a months-long pursuit that would have put some of the biggest U.S. newspapers under one roof.

The companies’ handshake deal early last month, in which Gannett would buy Tronc for about $18.75 a share, collapsed when bankers wouldn’t line up to fund the transaction, a person familiar with the matter said, asking not to be identified discussing private information. Gannett said financing wasn’t an issue. Shares of Tronc plunged as much as 27 percent to $8.76 in New York Tuesday, while Gannett rose as much as 5.4 percent to $8.19.

The decision to walk away from Tronc probably won’t change the acquisitive streak of McLean, Virginia-based Gannett. The company has already bought the publishers of the Milwaukee Journal Sentinel and the Record of Bergen County this year and acquired 15 dailies in 2015. Gannett, the owner of USA Today, is trying to get bigger to compete more aggressively with online news sites for national readers and advertisers.

Besides Tronc, the only other major publicly traded national newspaper chain left in the U.S. is McClatchy Co., which owns the Miami Herald, Charlotte Observer and Kansas City Star. Other peers include closely held Cox Newspapers, Hearst Corp., and the Newhouse family’s media holding company, Advance Publications Inc.

“I would expect Gannett will step up its investments in digital businesses to try to offset the secular decline of its print operations,” said Paul Sweeney, an analyst at Bloomberg Intelligence. “I wouldn’t be surprised to see Gannett come back to the Tronc deal at some point in the future, but presumably at a much lower price point.”

Gannett’s decision ends a roller-coaster ride for both publishers, with Tronc Chairman Michael Ferro initially rebuffing Gannett’s overtures in favor of a plan to produce more video and distribute stories to more readers. Gannett had made two previous public offers -- one in April for $12.25 a share and a second in May for $15 a share. Tronc’s board rejected both as too low and not in shareholders’ best interests.

“It is unfortunate that Gannett’s lenders made their decision to terminate their role in the transaction without the benefit of Tronc’s third quarter financials or any future projections,” Tronc said in a statement Tuesday. “Tronc remained a constructive partner to Gannett as it sought to complete its financing for the agreed upon purchase price.”

Financing was available, but Gannett “determined to terminate discussions with Tronc after considering both accretion to shareholders and whether the terms make sense for the company,” Gannett said in an e-mailed statement Tuesday.

The deal would have married Gannett’s portfolio of more than 100 dailies and 1,000 weeklies with Tronc’s Los Angeles Times, Chicago Tribune, San Diego Union-Tribune, Baltimore Sun, Orlando Sentinel and other publications.

Though Gannett is already the biggest newspaper publisher in the U.S. by daily circulation, Tronc offered something Gannett lacks: big-city newspaper brands with national reach. After USA Today, Gannett’s most widely circulated paper is the Arizona Republic.

Daily Circulation by Company

Market Share

Gannett12%
Digital First Media8%
News Corp.6%
Tronc5%
McClatchy5%
New York Times4%
Advance3%
BH Media3%
Lee3%
Hearst2%
New Media2%
Other (200 companies with over 2,000 titles)45%
Source: Bloomberg Intelligence

Last year, the business saw the most deals for the largest amount of money since the 2008 financial crisis, according to Dirks, Van Essen & Murray. The firm, which specializes in advising on newspaper mergers and acquisitions, said 70 daily papers were sold in 2015 for a combined $827 million.

With Gannett out as a suitor, the pressure is on Ferro to make his digital strategy a success. To fend off Gannett, Ferro sold enough stock in May to long-time friend Patrick Soon-Shiong at $15 a share to make Soon-Shiong’s Nant Capital the second-largest shareholder, edging out Oaktree Capital Management. Billionaire Soon-Shiong said he wants to use technology he’s developed to transform the experience of reading a print newspaper.

Ferro renamed the Chicago-based newspaper chain, formerly known as Tribune Publishing, amid the hostile takeover attempt.

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