Gan­nett re­treats from buy­ing Tronc

Sun’s par­ent com­pany re­ports lower sales and profit for third quar­ter

Baltimore Sun - - DEADLY BUS CRASH - By Michael Hiltzik The As­so­ci­ated Press con­trib­uted to this ar­ti­cle.

Gan­nett on Tues­day abruptly ended its six-month ef­fort to ac­quire Tronc Inc., owner of The Bal­ti­more Sun, Chicago Tri­bune, Los An­ge­les Times, Or­lando Sentinel and sev­eral other news­pa­pers.

The deal would have ex­tended the foot­print of Gan­nett, the na­tion’s largest news­pa­per com­pany, and marked a ma­jor con­sol­i­da­tion in an in­dus­try be­lea­guered by tech­no­log­i­cal chal­lenges and de­clin­ing rev­enue. But it was ham­pered by a last-minute with­drawal of sup­port last week by bankers ex­pected to fi­nance the trans­ac­tion.

Tronc shares fell in Nas­daq trad­ing Tues­day to close at $10.54, down12.4 per­cent. The stock had been trad­ing at $17 a share as re­cently as last week, be­fore re­ports that the fi­nanc­ing for Gan­nett’s bid was in jeop­ardy.

Gan­nett shares ini­tially rose on the New York Stock Ex­change on Tues­day, but they closed at $7.59, down 2.3 per­cent. Gan­nett in­vestors had been wary of the vi­a­bil­ity of the Tronc deal, how­ever, es­pe­cially af­ter Gan­nett an­nounced dis­ap­point­ing quar­terly fi­nan­cial re­sults last week. Gan­nett shares are down more than 50 per­cent in the last six months.

Sep­a­rately, Tronc an­nounced af­ter the Gan­nett, which pub­lishes USA To­day, de­cided to aban­don its pur­suit of Tronc af­ter it no longer had ac­cess to money to fi­nance the deal. mar­kets closed Tues­day that its losses deep­ened to $10.5 mil­lion in the most re­cent quar­ter, while rev­enue slid 6.8 per­cent to $378.2 mil­lion. Ad­ver­tis­ing rev­enue fell 11 per­cent. In its dig­i­tal unit, dubbed “troncX,” ad rev­enues slipped 2.2 per­cent to $47.3 mil­lion. Print-ad rev­enue fell 13 per­cent, to $154.5 mil­lion; cir­cu­la­tion rev­enue for the tra­di­tional busi­ness also dipped 1 per­cent, to $117.1 mil­lion.

Gan­nett an­nounced its with­drawal in a state­ment in which it “con­firmed that the com­pany has been en­gaged in dis­cus­sions with Tronc Inc. re­gard­ing a po­ten­tial trans­ac­tion and has de­ter­mined not to pur­sue an ac­qui­si­tion of Tronc.”

Talks be­tween the two com­pa­nies were dif­fi­cult and at times ac­ri­mo­nious. Gan­nett first tried to ac­quire the for­mer Tri­bune news­pa­pers in April with an of­fer of $12.25 a share, or about $400 mil­lion. The over­ture was re­jected by Michael Ferro, Tronc’s largest share­holder and nonex­ec­u­tive chair­man, who ac­cused Gan­nett of try­ing to “steal the com­pany.”

Gan­nett later pub­licly im­proved its of­fer to $15 a share, or $475 mil­lion, ex­clud­ing debt. In the latest stage of talks, the of­fer was re­port­edly raised to $18 or more.

Ul­ti­mately, Ferro agreed to ac­cept Gan­nett’s latest of­fer. Some ma­jor share­hold­ers, in­clud­ing Los An­ge­les in­vest­ment firm Oak­tree Cap­i­tal Man­age­ment, urged Ferro to sell months ago, at a lower price, and had threat­ened le­gal ac­tion.

The of­fer’s col­lapse leaves ques­tions about the fu­ture course of both com­pa­nies. Ferro has tied Tronc’s fu­ture in part to the in­fu­sion of new tech­nolo­gies, in­clud­ing some as­so­ci­ated with Los An­ge­les en­tre­pre­neur Pa­trick Soon-Shiong, who be­came the com­pany’s sec­ond-largest share­holder and vice chair­man in May.

Tues­day morn­ing, Tronc said the trans­for­ma­tion plan re­mained on track.

“Tronc con­tin­ues to make progress in im­ple­ment­ing the com­pany’s strate­gic plan to lever­age tech­nol­ogy and ef­fec­tively mon­e­tize its world-class con­tent,” the com­pany said. “The im­ple­men­ta­tion of this plan will take time but the com­pany re­mains on track in terms of de­liv­er­ing on its near-term fi­nan­cial goals and is con­fi­dent in its abil­ity to de­liver im­proved per­for­mance and share­holder value.”


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