Gannett announced Monday an offer to buy Tribune Publishing, publisher of the Chicago Tribune and the Los Angeles Times, for $815 million, including the assumption of $390 million in debt.
The unsolicited, all-cash offer, which translates to $12.25 a share, represents a 63 percent premium over Friday's $7.52 a share closing price, as well as a premium over the $8.50 share price at which Tribune recently issued common shares, Gannett said.
Robert Dickey, president and CEO of Gannett, said in an interview Monday the company has been eyeing Tribune Publishing since June, and that it sees $50 million in savings annually and a platform for expanding its recently launched USA Today Network online. He said Tribune Publishing markets such as Chicago, Los Angeles, Baltimore and Orlando specifically "filled a number of geographic gaps" for Gannett.
After years of bankruptcy as part of Tribune Co. and since spinning off and going public in 2014, the Chicago-based newspaper chain soon to be known again as Tribune Publishing, owner of the Chicago Tribune, Los Angeles Times and other major daily newspapers, has acquired a range of other titles as well as endured the ups and downs of the market. Here is a recent history.
By Chicago Tribune
Oct 04, 2018 | 1:00 AM
"We are interested in buying the entire company," Dickey said. "We like all of the titles. For a variety of reasons, they all fit very nicely."
He added, "We want to build a sustainable model for local journalism."
By making its offer public, Gannett is appealing directly to Tribune Publishing shareholders after not receiving a prompt response from the Chicago-based company's board. Gannett first contacted Tribune Publishing about a combination of the two media companies April 12 and wanted to hear back by April 19. That deadline was extended to April 22 when Tribune raised concerns about the timing, according to copies of letters from Gannett that were filed with the Securities and Exchange Commission.
While it is not spelled out in the letters, sources said Tribune Publishing initially wanted to defer considering the offer until June. Tribune spokeswoman Dana Meyer said Monday the company offered to meet with Gannett after first-quarter earnings are released May 4.
"We're waiting to sit down with them," Dickey said. "We have a very fair offer out there — it speaks for itself — at a very attractive price."
The offer comes less than three months after Michael Ferro, who had been majority owner of the Chicago Sun-Times, became the largest shareholder of Tribune Publishing by acquiring, through his Merrick Media investment firm, 5.2 million shares of newly issued common stock for $44.4 million. Ferro became nonexecutive chairman of Tribune Publishing's board and a few weeks later CEO Jack Griffin was out and longtime Ferro associate Justin Dearborn was named CEO.
In a Monday letter to Dearborn released by Gannett, the company said it was "disappointed" by the response and Tribune was trying to "delay constructive engagement," and noted the all-cash value of the transaction meant it could be completed quickly.
Tribune Publishing acknowledged the offer Monday and said it told Gannett after it received the proposal that it would retain advisers to help it evaluate the proposal. It subsequently retained Goldman, Sachs & Co. and Lazard as financial advisers and Kirkland & Ellis as legal adviser.
"The board is committed to acting in the best interests of shareholders and will respond to Gannett as quickly as feasible," Tribune Publishing said in a statement. It also noted the proposal had "numerous contingencies" but did not elaborate.
A source said Tribune's board is "taking the offer seriously" but feels Gannett, by making the offer public, is rushing the process and not behaving in a manner consistent with how Gannett acquired Journal Media Group, publisher of the Milwaukee Journal Sentinel and other papers.
Also, the $12.25 per-share offer is "well below" what Tribune Publishing was trading at a year ago and "the new management team has not had time to really put their strategy into effect," the source said.
The offer would net Ferro's Merrick Media a tidy profit of $19.6 million on its February investment in Tribune Publishing.
Tribune Publishing shares were issued at $25.50 a share on July 24, 2014. A year ago, on April 24, 2015, they closed at $18.50 a share. Monday morning, shares jumped more than $4 a share and closed at $11.50 a share, up $3.98.
"We have a tremendous opportunity to apply data technology to Tribune Publishing's collection of award-winning brands and distribution platforms to create value for all of our key stakeholders," Dearborn said in a statement. "The board and the management team are committed to generating shareholder value. As we clearly conveyed to Gannett, we take their offer seriously and are seeking a reasonable amount of time for our board and advisors to properly vet the proposal against our own strategic plans."
Meyer said neither Dearborn nor Ferro was available for an interview.
McLean, Va.-based Gannett, which spun off as a stand-alone newspaper company in June 2015, closed on its acquisition of the Journal Media Group just four days before contacting Tribune Publishing. Gannett's portfolio of 107 publications includes the Detroit Free Press, Cincinnati Enquirer, Des Moines Register, Milwaukee Journal Sentinel and Arizona Republic.
Financial analyst Hamed Khorsand, an analyst for BWS Financial, said the Gannett offer makes sense for investors in light of management shake-ups, digital reboots and the falling valuation of Tribune Publishing since spinning off from Tribune Media in August 2014.
Khorsand said Tribune Publishing's failure to buy the Orange County Register out of bankruptcy last month — its winning bid was blocked by the Justice Department and the newspaper was sold instead to Digital First Media — was perhaps the final straw for some investors.
"It feels like the best way is to give an exit to shareholders and hand off the digital to somebody else who has been more successful at it," Khorsand said.
In a report Monday, CRT Capital Group analyst Lance Vitanza, who has an $18 price target on Tribune Publishing's stock, called the offer "intriguing," and said there was room for Gannett to up its bid. If Tribune Publishing continues to drag its feet, however, the prospects of a hostile takeover are challenging in an industry where cultural fit and regulatory concerns loom large, Vitanza said.