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GANNETT OFFERS 63 PCT. PREMIUM FOR TRIBUNE $815 million deal also includes taking over about $390M of debt.

Gannett Co. Inc. revealed this morning it had on April 12 offered to buy Tribune Publishing Co. for about $815 million, which would be $12.25 per share -- a 78.6-percent premium on where Tribune shares had been trading on April 11 and a 62.9-percent premium on where company shares closed last Friday -- as well as the assumption of about $390 million in debt.

Chicago-based Tribune then responded with a press release of its own, acknowledging the receipt of the unsolicited offer and said that on Friday it had engaged "financial and legal advisors to assist it in reviewing the proposal." Tribune's board, it said, was "in a thorough review."

Wall Street reacted quickly and positively: Tribune shares opened this morning at $12.25 and traded in the mid-$11 range most of the day, closing at $11.50 this afternoon, up almost 53 percent over Friday's close of $7.52. Volume was up 33.6 percent over the average number of shares changing hands in the previous 10 trading days, to almost 4.3 million shares.

Even Gannett saw a stock-price spike: shares in the McLean, Va.-based publisher rose almost 6-1/2 percent today, closing at $16.79 (its share volume more than doubled over the average of the previous 10 days of trading, to almost 2.4 million shares). Usually, the suitor in a deal such as this sees its shares take a hit after an offer. (Though the overall market was down today -- all the leading indices were off fractionally -- shares in New Media Investment Group Inc. and The New York Times Co. made nice gains, apparently from the "halo effect" of Gannett's offer.)

"We are confident that a combined Gannett and Tribune would add value for stakeholders of both companies as we work together to foster deep and vital connections among the members of our communities, provide excellent solutions for our business partners and drive value for our stockholders," said Robert Dickey, Gannett's president and chief executive, in a statement.

Gannett said it expected savings of about $50 million annually through "substantial synergies" that are "anticipated to drive compelling near- and long-term growth and value creation at the combined company."

Gannett seems newly emboldened after its separation from its broadcast television and digital media divisions last June after almost 10 months of planning (the TV and digital business is now called Tegna Inc.). As it was closing the spin off it also bought out its partner Digital First Media in 11 daily newspapers the two owned together in Texas, New Mexico and Pennsylvania, and just earlier this month closed on a $280 million deal to take over the Milwaukee Journal Sentinel and 17 newspapers in 13 markets that had been Journal Media Group Inc.

Tribune too is the product of a spin off -- following a legendary four-year bankruptcy that started in 2008, Tribune's investors (including a number of hedge funds and banks) decided to separate the print and TV/digital businesses and on Aug. 4, 2014, completed the split. Shares in the company traded at $20.59 at the time, but over the following 20 months declined 63-1/2 percent in value, as the company struggled to improve its bottom line through acquisitions of mid-sized and small dailies adjacent to its eight existing markets.

Tribune executives thought late last winter that all a plan to acquire the Orange County Register and The Press-Enterprise in Southern California needed was about $45 million. Chief Executive Jack Griffin convinced Chicago technology entrepreneur (and Chicago Sun-Times investor) Michael Ferro to invest in Tribune to the tune of a convenient $44.4 million and named him non-executive chairman. But within days of Ferro buying Tribune shares, he had ousted Griffin and almost all of the company's top managers.

Though Tribune made the winning bid for the papers, it lost out on the deal because of concerns by the U.S. Justice Department regarding anti-trust issues in the Southern California market, where Tribune owns the Los Angeles Times and the San Diego Union-Tribune.

Now, Ferro and his board must contend with the Gannett offer, which on the face is compelling, especially to non-management shareholders. While this morning's Tribune press release didn't seem hostile to Gannett's offer, it did take up 122 words explaining why it thinks Gannett's offer is a dumb idea.

"Tribune Publishing has been undertaking a transformation," the release said in part. "The company, which has a new board chair, [chief executive] and [chief financial officer], is focused on executing a content-first strategy. This strategy centers on using innovative technology to leverage Tribune Publishing's valuable content and distribution channels. The company plans to increase agility and drive innovation while driving efficiencies and reducing costs."

Wild speculation: Gannett has to sweeten the offer to about $900 million and a deal is struck where Gannett sells Tribune's Chicago titles to Ferro for $66 million (his original $44 million plus the $22 million profit he'd make if Gannett buys Tribune). A local group of civic leaders buys the Los Angeles and San Diego titles for about $450 million (under favorable terms). Gannett then gets the "good parts" of Tribune with none of the "bad parts" and Ferro continues to have a home-town toy to play with.
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Comment:GANNETT OFFERS 63 PCT. PREMIUM FOR TRIBUNE $815 million deal also includes taking over about $390M of debt.
Geographic Code:1U3IL
Date:Apr 25, 2016
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