After six months of pursuit, the Gannett Company and the former Tribune Publishing Company had agreed on a purchase price that would have merged the publisher of USA Today with the owner of The Los Angeles Times and The Chicago Tribune.
It was a deal intended to build a scale large enough to cut costs and eke out profits in an industry struggling with shrinking advertising revenue and declining circulations.
But late last week, Gannett’s latest quarterly earnings spooked the banks that had agreed to finance the deal, people briefed on the matter said. The results, showing print advertising plummeting, raised concerns that the newspaper industry might be facing steeper challenges than previously thought.
Unable to obtain additional financing for the deal, Gannett has now walked away.
In a brief statement on Tuesday, the company said that although it had it had been in discussions with Tribune Publishing, now known as Tronc, it “determined not to pursue an acquisition.”
Shares of Tronc were down nearly 17 percent in trading midday on Tuesday.
In its statement, Tronc said, “It is unfortunate that Gannett’s lenders made their decision to terminate their role in the transaction without the benefit of Tronc’s third-quarter financials or any future projections.”
Shares of Gannett were down just slightly. Its stock price has declined more than 50 percent since it made its acquisition proposal public in April.
An acquisition of Tronc would have been an aggressive bet by Gannett, which has traditionally bought newspapers in small or midsize markets. Yet a deal for the owner of newspapers like The Los Angeles Times and The Chicago Tribune could have helped Gannett attract more lucrative national advertising and achieve savings by combining some operations.
Gannett’s deal making has been watched closely in a media industry that is desperately trying to find new sources of revenue as print advertising income continues its decline. Part of its strategy has been to offset advertising declines by acquiring more papers and the revenue that comes with them.
“What Gannett’s trying to do is aggregate as many eyeballs as they can to become big enough to be the last one standing,” said Alan D. Mutter, who teaches media economics at the University of California, Berkeley, and writes about the media on the blog Reflections of a Newsosaur.