Gannett, Tronc end merger talks, terms
not 'acceptable'
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[November 02, 2016]
By Liana B. Baker and Jessica Toonkel
SAN FRANCISCO/NEW YORK (Reuters) - The
long-awaited merger between Gannett Co Inc <GCI.N>, the publisher of USA
Today, and Tronc Inc <TRNC.O>, the publisher of the Chicago Tribune and
the Los Angeles Times, fell apart on Tuesday after months of talks.
The abandonment of Gannett's bid comes as the newspaper industry had
been looking to consolidate in the face of declining circulation, rising
costs, shrinking advertising revenue and a shift to digital content.
Tronc, whose shares closed down more than 12 percent at $10.54, said on
Tuesday that a deal was agreed upon in mid-September with Gannett, but
Gannett later informed Tronc that its financing had encountered "an
unexpected delay."
Tronc Chief Executive Justin Dearborn, speaking on the company's
third-quarter earnings conference call, said that Tronc found out this
in the morning that Gannett had backed out of negotiations after six
months of talks and a due diligence process dating back to June.
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"We were disappointed that in the face of the reported challenges
surrounding its financing, Gannett's board determined it would not
complete the transaction," Dearborn said.
Earlier, a Gannett spokesman said a number of financing options were
available, but the No. 1 U.S. newspaper publisher by circulation decided
to terminate talks "after considering both accretion to shareholders and
whether the terms make sense for the company."
"In the end the terms were not acceptable," a Gannett spokesman said in
an email.
Gannett's shares fell 17 percent last week after a disappointing
quarterly loss, driven by advertising declines. The stock closed down
2.3 percent at $7.59 on Tuesday.
SIDE EFFECTS
Dearborn said the deal talks set Tronc back three to six months in
adopting its new digital turnaround strategy, saying the company delayed
projects and also had issues with recruiting sales people during the
talks.
Gannett and Tronc's deal had come close to being signed on Oct. 26,
Dearborn said.
The two parties had agreed to a purchase price of $18.75 per Tronc
share, or about $683 million overall, according to sources familiar with
the situation, who wished to remain anonymous because they are not
permitted to speak to the media.
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The Chicago Tribune building is seen in Chicago, Illinois,
U.S. May 16, 2016. REUTERS/Jim Young/File Photo
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However, in recent days, two of the banks lined up to provide
Gannett financing backed off the deal after Gannett's earnings.
After looking into securing financing at more expensive terms, it
decided to back away from the deal, the sources added, ending a
merger that been in the public eye since April.
Gannett made an initial unsolicited offer of $12.25 per share for
Tronc - formerly Tribune Publishing Co - in April, valuing the
company at about $815 million. Its raised offer of $15 per share a
month later publicly was also rejected.
Merrick Media LLC, an investment firm that owns 16 percent of Tronc
and is led by Tronc Chairman Michael Ferro, had resisted talks until
a few months ago and came under pressure from some of Tronc's
shareholders such as Los Angeles investment firm Oaktree Capital
Management to consider a deal.
Up to Monday's close, Gannett's shares had lost about 50 percent of
their value since it made its first offer for Tronc on April 25.
Tronc's shares had gained 60 percent.
Tronc said its revenue in the third quarter was $378 million, down
6.8 percent compared to $406 million a year ago. The distraction of
merger talks slightly reduced revenue, Tronc said.
(Reporting Liana B. Baker in San Francisco and Jessica Toonkel in
New York, additional reporting by Rishika Sadam and Supantha
Mukherjee in Bengaluru; editing by Sriraj Kalluvila and Bill Rigby)
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