April 25, 2016 Last Updated 8:40 am

Gannett goes public with Tribune offer, proposes $12.25 in cash per share deal

Morning Brief: Vox Media will be launching a new gadget blog as a Facebook page, bringing back one of The Verge’s founding editors, Paul Miller, to handle the duties

Things have not bee going so well at Tribune Publishing of late. In February CEO Jack Griffin was forced out after Michael Ferro invested $44.4 million and wrestled control of the company away from the management team. Then, the newspaper publisher’s effort to win the Freedom Communications auction and acquire the Orange County Register when south when the Department of Justice objected and said they saw the acquisition as creating a monopoly in Southern California.

Tribune Publishing newspapersToday, Gannett said they would like to end their suffering by acquiring the whole company, offering to buy the company for $12.25 in cash per Tribune share, or about $815 million. But the offer was made public today because Tribune Publishing had previously spurned Gannett’s overture, and so they are taking their offer public.

“We are disappointed by the response we received from you in your letter of April 22, 2016 regarding our proposal to acquire all of the outstanding shares of Tribune Publishing Company (“Tribune”) for an all-cash purchase price of $12.25 per share, and Tribune’s continued refusal to begin constructive discussions with us,” Gannett’s letter reads. “We believe our proposal, which we first made in my letter to your Board dated April 12, 2016 and reiterated in several phone discussions with Michael Ferro and you since, is highly compelling for Tribune’s stockholders and represents substantial value and immediate liquidity for them.”

The idea is to rile up the investors, who will likely be eager to cash in their chips, especially as the offer represents a substantial premium over Tribune’s share price (which closed Friday at $7.52 per share – obviously the stock is up today in pre-market trading). Also, Tribune is set to report earnings oN May 4, and few think the numbers will look particularly good.

The acquisition proposal dates back to April 12, just a short time after the Freedom Communications deal went south for Tribune. Tribune has now hired advisors to evaluate the offer.

“On receiving the April 12 proposal, the Company communicated by telephone to Gannett that the Board of Directors would engage financial and legal advisors to assist it in reviewing the proposal,” the company said today in response to Gannett going public. “On April 22, Tribune Publishing’s Board sent a letter to Gannett indicating it was finalizing engagements with Goldman, Sachs & Co. and Lazard as financial advisors and Kirkland & Ellis LLP as legal advisor. The Board is now engaged, with the assistance of its advisors, in a thorough review. The Board is committed to acting in the best interests of shareholders and will respond to Gannett as quickly as feasible.”

Both Tribune and Gannett went through spin offs in the past few years, with the Tribune Company’s broadcast arm becoming Tribune Media, and Gannett’s becoming TEGNA. Both print companies are now probably contractually locked out of competing in broadcast for a number of years, and so are looking to expand through newspaper acquisitions. Gannett recently acquired Journal Media Group, which itself was a newly created company when Journal Communications swapped its broadcast properties for the print properties of E.W. Scripps. With the acquisition Gannett gained the Milwaukee Journal Sentinel, as well as papers in Tennessee, California and elsewhere.

“Tribune Publishing has little history operating as an independent public company and may be unable to reach earnings targets… Recent management upheaval creates numerous risks with respect to strategy and execution going forward,” analysts from CRT Capital said today.

“We look forward to learning more over the coming days. There’s seemingly never a dull moment for Tribune Publishing shareholders, who over the past few months have lived through an unexpected strategic equity raise to fund an acquisition ultimately shot down by the DOJ; a new Chairman, CEO and CFO; and a significant overhaul to the Company’s operating plan.”

Here is Gannett’s letter to Tribune Publishing:

Dear Mr. Dearborn:

We are disappointed by the response we received from you in your letter of April 22, 2016 regarding our proposal to acquire all of the outstanding shares of Tribune Publishing Company (“Tribune”) for an all-cash purchase price of $12.25 per share, and Tribune’s continued refusal to begin constructive discussions with us. We believe our proposal, which we first made in my letter to your Board dated April 12, 2016 and reiterated in several phone discussions with Michael Ferro and you since, is highly compelling for Tribune’s stockholders and represents substantial value and immediate liquidity for them.

I want to remind you that Gannett’s $12.25 per share offer price represents a 63% premium to Friday’s closing stock price of Tribune, a 58% premium to the volume weighted average trading price over the past 90 days, and a multiple of 5.6x (including estimated pension and post-retirement benefits payable) your 2016 EBITDA estimate based on consensus research. The $12.25 per share offer price also represents a significant premium to the $8.50 share price at which Tribune recently issued common shares.

With our capability to commit to a deal without financing contingencies, we believe that Gannett is uniquely positioned to offer this level of premium to your stockholders and to quickly evaluate and finalize this transaction, allowing your stockholders to receive immediate and certain value.

As expressed previously, we believe the financial and strategic logic of a combination of our two companies is clear. The challenges for our industry in the digital age continue. Tribune has itself faced numerous challenges and leadership changes over the last few years. We believe Gannett is uniquely willing and able to propel Tribune into the position of strength that will allow its beloved and historic publications and other assets to survive and thrive in this challenging environment. By combining, we would create a company with the financial stability and flexibility equipped to preserve journalistic integrity, high standards and excellence for years to come. We would be able to both empower our journalists and facilitate the creation of exceptional content while delivering stockholder value.

Given the opportunity to benefit from the significant premium and near-term liquidity, we are confident that Tribune’s stockholders will embrace our offer. As we have indicated previously, we would prefer to negotiate a transaction with Tribune, but we have determined that making your stockholders aware of our all-cash proposal is necessary, given Tribune’s attempts to delay constructive engagement.

This matter is of the highest priority to us, and we continue to be ready to dedicate significant resources to completing due diligence and negotiating a transaction on an expedited basis. We have been working closely with our financial advisors at Methuselah Advisors and our legal advisors at Skadden, Arps, Slate, Meagher & Flom LLP and have completed an extensive analysis of the proposed transaction based on publicly available information. As well, we are confident that the regulatory approvals necessary to consummate the proposed transaction will be obtained.

This proposal, which is unanimously supported by our Board, is a non-binding expression of our current views, which remains, among other things, subject to satisfactory completion of due diligence, the negotiation, execution and delivery of a mutually satisfactory definitive merger agreement, approval of the definitive agreement by your and our Boards of Directors, approval of the transaction by your stockholders, and receipt of customary regulatory approvals.

Given the substantial value represented by our offer and the other compelling benefits of a combination of Gannett and Tribune, we are confident that Tribune’s non-management stockholders will support our proposal. Continuing to refuse to engage in a dialogue with us will only serve to delay the ability of your stockholders to receive the value represented by our all-cash offer. We therefore are prepared to consider all alternatives to complete this transaction. In the meantime, we remain eager to meet with you and your team as soon as possible to progress the transaction.

Sincerely,
GANNETT CO., INC.

/s/ Robert Dickey
Robert Dickey
President and CEO


The New York Times reported this morning that Vox Media will launch its latest digital media product as a Facebook page rather than a new website. Circuit Breaker will be a destination for tech gadgets, more for consumers than Re/code, and more focused on the tech toys themselves that The Verge, which sometimes veers off into other digital news and opinion.

The effort will be one of the first to attempt to build a brand strictly on a third party platform such as Facebook or Apple News.

“We started out, a few years ago, building media brands on websites, because that’s where we thought the growth was, and we were right about that,” Jim Bankoff, Chairman and CEO, Vox Media Inc. told the NYT.

Now, Vox is trying its hand at embracing the concept of not owning the platform – either a silly surrendering of control, or a brilliant acceptance of modern digital publishing, depending on your attitude – and depending on the success of the project.

The new Facebook page will be edited by Paul Miller, one of the founders of The Verge, who famously quit the Internet for a year back in 2012. Today, the site admitted that Miller had returned to The Verge earlier, writing under the anagram pseudonym Al Plumlier


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