Gannett Co. is not walking away from its offer to acquire rival newspaper publisher Tribune Publishing, upping its bid to $15 a share.
Roger Yu of USA Today, a Gannett paper, had the day’s news:
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 23% in pre-market trading Monday to $14.10.
“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.
Joshua Jamerson of The Wall Street Journal examined the reasons behind the proposed deal:
Newspaper companies have struggled in recent years, in part from disruptions caused by the Internet. Gannett’s annual operating revenue last year slipped 9% to $2.89 billion, while Tribune’s operating revenue fell about 2.1% to $1.67 billion in 2015.
Tribune and Gannett have sent increasingly terse public letters back and forth since Gannett first went public with its offer. Tribune has accused Gannett of “playing games” and calling its approach “aggressive and hostile.” Gannett has urged Tribune’s shareholders not to back Tribune’s slate of board nominees at the annual meeting June 2 to send a message to the company to engage in talks.
Last week, Tribune approved a so-called poison pill as part of its defense to try to stop Gannett from acquiring the publisher of the Los Angeles Times and other newspapers. Gannett owns USA Today and 107 other U.S. dailies. Shareholder rights plans, or poison pills, are designed to dilute the value of a stock by flooding the market with additional shares if certain conditions are met, making it expensive for an investor to acquire a controlling stake.
Georg Szalai of The Hollywood Reporter looked at Gannett’s reasoning:
Gannett said its decision to submit a revised offer “reflects additional analysis of certain information revealed in Tribune’s financial statements filed on May 5, 2016, including debt, cash balance and pension liabilities.” It added that “after further review, Gannett has greater confidence in its ability to yield additional operational improvements in this transaction.”
It said though that “these expectations are subject to the completion of confirmatory due diligence.”
Said John Jeffry Louis, chairman of Gannett: “Our increased offer demonstrates our commitment to engaging in serious and meaningful negotiations with the Tribune Board to reach a mutually agreeable transaction where Gannett acquires all of Tribune. It is evident from our discussions with Tribune shareholders that there is overwhelming support for the companies to engage immediately regarding our proposed transaction. 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.”
