Gannett Abandons Effort to Buy Newspaper Publisher Tronc

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The former Tribune Publishing Company, now known as Tronc, is the owner of The Los Angeles Times and The Chicago Tribune.

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Emily Berl for The New York Times

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.

Earlier this year, Gannett acquired the Journal Media Group for about $280 million, adding 15 daily newspapers including The Milwaukee Journal Sentinel. It also recently bought the North Jersey Media Group, which owns The Record of Bergen County, N.J.

But even with scale, Gannett continues to have a reputation as a brutal cost-cutter, stripping out excess and sometimes cutting to the bone in a quest for profit.

Over the years, it has bought newspapers, then consolidated printing operations at regional presses and shuttered redundant facilities. It has moved newspaper production to central hubs, sold off real estate and laid off thousands of employees.

The terms of the deal reached with Tronc meant that Gannett would have paid $18.75 a share in cash, requiring about $1 billion in financing, according to the people briefed on the matter, who asked not to be named discussing a confidential document.

Of the three banks that Gannett lined up, two balked after the third-quarter numbers came out, but one, Jefferies, had still been committed to finance the deal, these people said.

In April, Gannett made public an offer of $12.25 a share for Tribune Publishing. In rejecting the bid, Justin C. Dearborn, the company’s chief executive, said at the time that the execution of its “stand-alone strategic plan will generate shareholder value in excess of Gannett’s proposal.”

Gannett sweetened its offer to $15 a share. The board rejected that proposal as well, gaining some firepower in the form of an investment by Nant Capital, founded by Dr. Patrick Soon-Shiong, a billionaire doctor who has started several health care companies. Dr. Soon-Shiong became vice chairman as part of his investment.

With the Gannett deal terminated, Tronc will have to navigate the newspaper industry with a unique, yet untested strategic plan.

Michael W. Ferro Jr., a technology entrepreneur who in February took a $44 million stake in Tribune Publishing and became its executive chairman, initially rejected a combination with Gannett. He instead promoted a technology-driven approach with concepts like artificial intelligence that he said would increase the value of the company beyond Gannett’s offer.

In June, he changed the company’s name to Tronc, which stands for Tribune Online Content, and moved the stock listing to the Nasdaq Stock Market from the New York Stock Exchange to make it seem more like a dot-com-era technology start-up.

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1 November 2016 | 4:17 pm – Source: nytimes.com

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