Earlier today, Politico reported that something was not right with the ongoing $1 billion merger between Gannett, the largest newspaper chain by circulation in
the U.S., and Tronc, formerly known as Tribune (but decided to appeal to Millennials by changing its name), the publisher of such papers as The Los Angeles Times,
the Chicago Tribune and the Baltimore Sun. According to the report filed earlier today, the Tronc board had been scheduled to meet Wednesday afternoon, presumably with the deal a prime topic, but that meeting was cancelled on short notice. Politico speculated that one of the likely reasons for the meeting cancelation was to discuss the complicated structure to preserve the independence of the L.A. Times and to keep one of its major investors around.
The answer was simpler, if perhaps more surprising: as Bloomberg reported moments ago, banks financing Gannett’s takeover of Tronc Inc.have backed out, putting a merger of the newspaper companies in doubt.
To be sure, yanking financing was a staple during the last days of the 2007 credit bubble, but nowadays doing such a last minute manoeuvre has been largely unheard of. At least until today.
Gannett and Tronc had agreed to a deal price of about $18.75 a share, but several lenders withdrew over concerns about the health of the two companies’ businesses at that valuation, Bloomberg adds. Talks between Gannett and Tronc continue in the hopes of salvaging the effort to merge, however it appears that the deal now is very much in question especially when looking at the market reaction.
Shares of Tronc plunged 21 percent to $13.42 before trading was halted. Gannett fell as much as 18 percent to $8.08, their lowest price in almost a year and a half.
Gannett has been trying to buy Tronc for months to create a company with the scale to compete more aggressively with online news sites for national readers and advertisers. A deal would marry Gannett’s portfolio of more than 100 dailies and 1,000 weeklies with Tronc’s Los Angeles Times, Chicago Tribune, San Diego Union-Tribune, Baltimore Sun, Orlando Sentinel and other publications.
Gannett had made two previous offers – one in April for $12.25 a share and a second in May for $15 a share. Tronc’s board rejected both as too low and not in shareholders’ best interests. Chairman Michael Ferro renamed the Chicago-based newspaper chain, formerly known as Tribune Publishing, amid the hostile takeover attempt. Perhaps in retrospect he should have taken the offer.
In an earnings call this morning, Gannett CEO Bob Dickey declined to comment on the Tronc talks but said its plans for acquisitions depend on whether the financing “make sense.” “It all comes down to making sure that these are accretive for our shareholders and add value and that the financing terms make sense for the company,” Dickey said. “We’re not going to add properties for the sake of adding properties.”
All may not be lost however. In an attempt to salvage the deal with the help of another Reuters trial balloon, the news service reported that attempts to save the deal remain.
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