Kevin Dowd November 01, 2016
After failing to secure the necessary financing, Gannett (NYSE: GCI) has abandoned its attempt to acquire Tronc (fka Tribune Publishing) (NASDAQ: TRNC) and create the largest newspaper publisher in the US. The release of Gannett’s 3Q earnings last week is believed to have concerned the banks the company had previously lined up to provide debt for the sale, ultimately scuttling a deal that would have brought together USA Today, The Los Angeles Times, The Chicago Tribune and more than 100 other publications under one corporate roof.
The two companies had previously agreed on a purchase price of $18.75 per share, representing a 149% premium to Tronc’s share price when Gannett first mounted an acquisition offer in April. It was the latest effort in an ongoing consolidation spree undertaken by Gannett, following the company’s acquisition that same month of the 15 papers in the Journal Media Group for $280 million.
Oaktree Capital Management owns about a 15% stake in Tronc and earlier this year had urged the company to pursue a sale.
In a single-sentence press release, Gannett confirmed it has “determined not to pursue an acquisition,” a decision Tronc called “unfortunate” in a release of its own. Tronc’s stock plunged 12.4% Tuesday, finishing the day trading at $10.54. Shares in Gannett stayed relatively steady in the wake of the news, sliding just 2.3% to $7.59 per share.
While Tronc’s shareholders may not have enjoyed the news, the end (at least for now) of Gannett’s pursuit is a clear positive for the publisher’s employees. Gannett has typically pursued a ruthless approach to consolidation, hacking down staff numbers in order to increase profits in an industry still reeling from print advertising revenues that cratered over the past decade. In turn, newspaper readers in the markets where Tronc's outlets still reign supreme (Chicago, Los Angeles, Baltimore and San Diego, among others) will also likely benefit from the deal falling through—if only for now—in the retention of more reporters to pursue news of public consequence.
An acquisition by Gannett also would have added serious new weight to Tronc’s debt load, an experience with which the publisher is quite familiar after it was forced to file for bankruptcy in 2008.
The reality is that newspapers are not a booming business. Tronc has announced plans to incorporate AI more heavily into its content—and for other ostensibly forward-thinking initiatives—but very genuine questions remain about its ability to survive financially in the long term. Absorption into Gannett’s existing properties would have doubtless created real cost-saving synergies.
But the real tragedy, of course, is that the name Tronc will now survive in all its harsh, weirdly abbreviated, cynical, ungainly glory.