Gannett Withdraws Offer for Tronc Due to Inability to Finance
What: Gannett is walking away from its attempted takeover of Tronc, the publisher of the Los Angeles Times, Chicago Tribune and other major dailies. In a brief statement on Tuesday, the company said that although it had it in discussions with Tribune Publishing, now known as Tronc, it “determined not to pursue an acquisition.” Gannett has not been able to raise funds to finance the deal.
Why it matters: The now cancelled deal would have put together the largest newspaper publisher in the U.S.,with Tronc the third largest newspaper publisher. The newspaper industry is in a consolidation phase due to print advertising revenue declines.
Gannett has announced is pulling off its attempt to takeover Tronc, the publisher of the Los Angeles Times, Chicago Tribune and other major dailies as well as Spanish-language newspapers in several markets including Los Angeles, Chicago and San Diego.
Gannett’s target was said to be elusive from the beginning, when it revealed in the spring that it was offering US$388 million for the Chicago company, which it said refused to partake in “constructive discussions.”
Tribune Publishing, as it was known at the time, released an acerbic letter calling Gannett “erratic” and “unreliable,” saying that its executives cancelled meetings without reason and once asked it to make a decision about a proposed buyout within 90 minutes.
Tribune Publishing's Chairman Michael Ferro said in an interview then that Gannett was "trying to steal the company."Ferro, who owned a stake in cross-town rival Chicago Sun-Times, had himself just become an insider Tribune Publishing after investing US$44.4 million in February.
Tronc Inc. at one point attempted to fend off Gannett by bringing in California entrepreneur Dr. Patrick Soon-Shiong as an investor. He backed chairman Michael Ferro's plans to shake up the troubled media company with what it called tech-focused initiatives involving artificial intelligence and global expansion in entertainment news and video. The plans were widely criticized.
Tronc maintained that it still had "serious doubts" about Gannett's ability to finance a potential transaction. The company said it had worked through a purchase price with Gannett in mid-September, but did not disclose what the amount was. Tronc said last week it was told by Gannett that financing hit an unexpected delay.
Both Gannett and Tronc have struggled with sliding ad revenue. Print ad revenues have been falling for years across the industry, and growth in digital ads and online-only subscriptions has not been enough to offset that.
Gannett as Consolidator
Gannett, which recently released 2 percent of its workers, has dealt with those trends by snapping up newspaper companies. This year, the McLean, Virginia company acquired Journal Media Group, the publisher of the Milwaukee Journal Sentinel, Knoxville News Sentinel and other papers, as well as the North Jersey Media Group, which publishes The Record and other papers around that state.
Shares of Gannett Co., publisher of USA Today, rose more than 3 percent in morning trading on Tuesday. Tronc's stock tumbled more than 19 percent.
"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," the company said. "Tronc remained a constructive partner to Gannett as it sought to complete its financing for the agreed-upon purchase price, however, Gannett was unable to do so and terminated discussions."