Gannet Co. proposed to acquire Tribune Publishing Co. in a deal valued at about $400 million, as the owner of the USA Today seeks to add the Los Angeles Times and Chicago Tribune to its portfolio of newspapers in a rapidly consolidating industry.
The offer values Tribune shares at $12.25 each in cash, a 63% premium to their closing price Friday. Gannett said that when including the assumption of Tribune’s debt, the deal has an overall value of $815 million.
Tribune, in a news release, said it told Gannett it would seek financial and legal advisers to assist it in reviewing Gannett’s proposal. Tribune, which said it was still focused on its organizational changes, said it has started a review of Gannett’s proposal and would “respond to Gannett as quickly as feasible.”
A Tribune Publishing representative was unavailable for further comment Monday.
Gannett had said in its news release that it has been disappointed with Tribune Publishing’s response to its proposal made April 12 and frustrated with its “refusal to begin constructive discussions with us.”
A deal would tie household news outlets such as Gannett’s USA Today and Tribune’s Los Angeles Times under one firm, as newspaper companies have struggled in recent years, in part from disruptions caused by the Internet.
“A combination with Tribune would rapidly advance Gannett’s strategy to grow the USA Today Network,” Gannett Chairman John Jeffry Louis said in prepared remarks.
Shares of Tribune Publishing jumped 56% to $11.70 in premarket trading. Gannett shares were inactive.
Gannett’s proposal comes amid a frenzy of newspaper industry deals, as bigger players look for the economic advantages of scale in a business under pressure on multiple fronts, and scout for bargain opportunities.
Gannett is already the largest publisher, with 12% of U.S. newspaper daily circulation, according to the Alliance for Audited Media. Digital First Media has 8%, News Corp has 6% and Tribune Publishing has 5%. Last year, 70 daily newspapers changed hands in 27 transactions for $827 million, the highest total for the industry since the 2008 economic crisis, according to data compiled by merger-and-acquisition adviser Dirks, Van Essen & Murray.
“The combined organization would offer Tribune employees a broad range of advancement opportunities within a larger organization with the financial strength to meet the industry challenges we all face,” Gannett Chief Executive Robert J. Dickey said in a written statement.
Gannett said it can quickly consummate a transaction without any financing conditions and without threatening the tax-free treatment of Tribune’s recent spinoff transaction.
Tribune Publishing was spun off in late 2014 as a separate company from broadcast holdings that became Tribune Media, less than two years after their predecessor company emerged from bankruptcy.
Since then, Tribune Publishing has struggled, with its stock price tumbling 69% since the spinoff, from $24.50 a share to $7.52 at market close on Friday. The company has reported declining year-over-year revenues in almost every quarter since the spinoff as it struggles with a sharp industrywide falloff in advertising dollars as readers and marketers migrate online.
Gannett, meanwhile, is considered one of the newspaper companies in the strongest position to hunt for acquisitions as struggling rivals look to exit. The company, whose assets include USA Today and 92 mostly medium- and small-market papers, also split off from its broadcast properties and signaled last year that it is in the market for acquisitions in markets with populations between one million and three million people.
Gannett’s stock has risen roughly 5.4% to $15.77 since June 2015, when its publishing assets were spun off to form a debt-free publicly trading company, which kept the Gannett name.
Gannett’s annual revenue last year slipped 9% to $2.89 billion, while Tribune’s operating revenue fell about 2.1% to $1.67 billion in 2015.
For Tribune Publishing, the past several months have been especially turbulent.
Last summer, Tribune Publishing rejected overtures from philanthropist Eli Broad and private equity-firm Apollo Global Management to sell the Los Angeles Times, its largest revenue generator. The process led to the ugly firing of the paper’s publisher, Austin Beutner, and elicited a letter from at least one major shareholder to the board urging it to break up the company or move to make it private.
Speculation about Tribune Publishing being in talks to sell itself was triggered in November, when Rupert Murdoch, executive chairman of News Corp and 21st Century Fox, said on Twitter that there was “strong word” Tribune Publishing was to be bought by a big Wall Street firm.
At the time it was reported that private-equity firm Apollo Global Management had approached Tribune Publishing about a sale. The Wall Street Journal reported that the bid didn’t result in talks.
Representatives from News Corp—which owns The Wall Street Journal—and Apollo Global weren't immediately reachable for comment Monday.
In February Tribune Publishing’s upper ranks went through a shake-up when a new investor provided a substantial cash infusion. Merrick Media LLC, which is owned by Chicago-based investor Michael W. Ferro Jr., paid $44.4 million for 16.6% of the company’s shares, becoming the largest shareholder. Mr. Ferro became nonexecutive chairman, replacing Eddy Hartenstein.
Less than three weeks later, Jack Griffin departed as CEO and was replaced by Justin Dearborn, a longtime associate of Mr. Ferro who previously was chief executive of Merge Healthcare Inc., a health-records and imaging company that International Business Machines Inc. acquired. Mr. Griffin had been brought in as CEO of Tribune Publishing in 2014 to help orchestrate the publishing company’s spinoff.
Amol Sharma and Joshua Jamerson WSJ.com