Gannett Offers to Buy Tribune Publishing for $815 Million Cash

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ChicagoGannett announced Monday an offer to buy Tribune Publishing, publisher of the Chicago Tribune, Los Angeles Times and other newspapers, for $815 million, including the assumption of $390 million in debt.

The unsolicited, all-cash offer, which translates to $12.25 a share, represents a 63 percent premium over Friday?s $7.52 a share closing price, as well as a premium over the $8.50 share price at which Tribune recently issued common shares, Gannett said.

Robert Dickey, president and CEO of Gannett, said in an interview Monday the company has been eyeing Tribune Publishing since June, and that it sees $50 million in synergies with the Chicago-based media company, and a platform for expanding its recently launched USA Today Network online. He said Tribune Publishing markets such as Chicago, Los Angeles, Baltimore and Orlando specifically ?filled a number of geographic gaps? for Gannett.

?We are interested in buying the entire company,? Dickey said. ?We like all of the titles. For a variety of reasons, they all fit very nicely.?

By making its offer public, Gannett is appealing directly to Tribune Publishing shareholders after it did not receive the prompt response it sought from the Chicago-based company?s board. Gannett first contacted Tribune Publishing about a combination of the two media companies April 12 and wanted to hear back from it April 19. That time frame was then extended to April 22 when Tribune raised concerns about the timing, according to copies of letters from Gannett that were obtained by the Tribune.

The offer also comes less than three months after Michael Ferro, who had been majority owner of the Chicago Sun-Times, became the largest shareholder of Tribune Publishing by acquiring through his investment firm, Merrick Media, 5.2 million shares of newly issued common stock for $44.4 million. Ferro became nonexecutive chairman of Tribune Publishing?s board and a few weeks later, CEO Jack Griffin was out and longtime Ferro associate Justin Dearborn was named CEO.

In a Monday letter to Dearborn released by Gannett, the company said it was ?disappointed? by the response and Tribune was trying to ?delay constructive engagement? and noted the all-cash value of the transaction meant it could be completed quickly.

Tribune Publishing acknowledged the offer Monday, and said it told Gannett after it received the proposal that it would retain advisers to help it evaluate the proposal. It subsequently retained Goldman, Sachs & Co. and Lazard as financial advisers and Kirkland & Ellis as legal adviser.

?The board is committed to acting in the best interests of shareholders and will respond to Gannett as quickly as feasible,? Tribune Publishing said in a statement. It also noted the proposal had ?numerous contingencies? but did not elaborate.

A source said Tribune?s board is ?taking the offer seriously? but feels Gannett, by making the offer public, is rushing the process and not behaving in a manner consistent with how Gannett acquired Journal Media Group, publisher of the Milwaukee Journal Sentinel and other papers.

Also, the $12.25 per-share offer is ?well below? what Tribune Publishing was trading at a year ago and ?the new management team has not had time to really put their strategy into effect,? the source said.

However, it would net Ferro?s Merrick Media a tidy profit of $19.6 million on its February investment in Tribune Publishing.

Tribune Publishing shares were issued at $25.50 a share on July 24, 2014. A year ago, on April 24, 2015, they closed at $18.50 a share. Monday morning, shares jumped more than $4 a share, and the stock was trading at around $11.60 a share at midday.

(Source: TCA)