Tribune Publishing shares plummet after the company revises 2015 revenue, earnings estimates.(Photo: Frederic J. Brown, AFP/Getty Images)
Gannett Co., which owns USA TODAY and more than 100 local news properties nationwide, said Monday it raised its offer to buy Tribune Publishing Co. to $15 per share, dialing up the pressure after its earlier bid was rejected by Tribune’s board of directors despite some shareholders’ call for a negotiation.
The revised offer values Tribune (TPUB), which owns the Los Angeles Times, Chicago Tribune and nine other dailies, at about $479 million. Gannett (GCI) also offered to assume about $385 million of Tribune’s debt, valuing the total deal at about $864 million.
Revised after Gannett met with Tribune shareholders, the heightened offer represents a premium of 99% to Tribune’s closing price of $7.52 per share on April 22, the last trading day before Gannett revealed its initial offer of $12.25.
Shares of Tribune Publishing rose 27% in pre-market trading Monday to $14.52.
"After further review, we have greater confidence in our ability to yield additional operational improvements in this transaction,” Gannett’s CEO Robert Dickey wrote in a letter Monday to Tribune’s board. The McLean, Va.-based company also said it was confident it can receive the antitrust clearance necessary to complete the deal.
Seeking to acquire newspapers and affiliated digital news properties in markets where Gannett lacks a presence, Dickey sent on April 12 a private letter – outlining his all-cash offer -- to Justin Dearborn, Tribune’s CEO, and Michael Ferro, the largest Tribune shareholder who is also its board chairman.
Unable to get a formal negotiation started, Gannett then revealed the offer publicly on April 25, forcing Tribune to hire advisers to begin reviewing the bid. On May 4, Tribune’s board unanimously rejected the offer, saying the company is poised to grow on its own.
In an earnings announcement on the same day, Tribune also told investors and analysts that it was in “the early stages of a compelling transformation” that seeks greater revenue through digital platforms and leveraging the Los Angeles Times brand.
Tribune created a new business unit, called Tronc, that plans to aggregate its in-house digital resources and use software and widgets to better profile its readers for more relevant content and higher digital advertising rates. It also plans to open seven new foreign bureaus for the Los Angeles Times.
Tribune also said on May 4 that its first quarter net loss totaled $6.5 million vs. $2.5 million of net profit in the year-ago period. Revenue remained flat at $398.2 million as print advertising sales continued to tumble.
“By not engaging constructively with Gannett and continuing to pursue an unproven strategy based on its Tronc platform, we believe Tribune is jeopardizing its shareholders’ investment and disregarding their best interests,” Dickey said.
The second-largest shareholder of Tribune, Oaktree Capital, also wasn’t fully convinced of Tribune’s turnaround plan. Earlier this month, the investment firm, which owns about 15% of Tribune, urged Tribune’s management to begin discussions with Gannett.
John Jeffry Louis, chairman of Gannett’s board, intimated that there were other shareholders who were eager to see a deal. “It is evident from our discussions with Tribune shareholders that there is overwhelming support for the companies to engage immediately regarding our proposed transaction,” Louis said Monday.
Sensing growing pressure, Tribune Publishing has adopted a “shareholder rights plan,” known to investors as a poison pill, to thwart Gannett’s bid. Tribune plans to issue new shares if Gannett, or another investor, acquires 20% or more of the company. The move would dilute the acquirer’s stake, thus discouraging in advance any large-stake acquisition plans by an outside investor.
Meanwhile, Gannett is urging Tribune shareholders to withhold their votes next month for election of eight nominees to Tribune’s board of directors.
“By increasing our offer at this time, we are reaffirming Gannett’s belief that this transaction would deliver significant value to both companies’ stakeholders and that the time to act is now,” Louis said.
