Tribune Publishing formally rejects Gannett’s $815M offer
Morning Brief: Trinity Mirror closes its new daily tabloid, New Day, only months after launching it; layoffs expected at The Boston Globe; Time Inc. reports a loss in Q1, as it looks to force revenue growth through making acquisitions
The publisher of the Los Angeles Times, Chicago Tribune and other daily newspapers last night formally rejected Gannett’s $815 million offer to buy the company. The announcement, not unexpected, followed the release of Tribune Publishing’s first quarter earnings, which showed the company continuing to experience falling print ad revenues.
Tribune Publishing reported a loss in Q1, and flat revenue, despite the addition of the San Diego Union Tribune to the company’s portfolio. Excluding the San Diego daily, revenue fell 7.4 percent. After the earnings release, the company revealed that it had sent a letter to Gannett informing them that the board had unanimously rejected the current offer of $12.25 per share for TPUB stock.
“After thorough consideration, the Board has unanimously concluded that it is not prepared to engage with Gannett about a combination of our companies based on the value you indicated in the Proposal,” the letter states. “The Board believes that the price reflected in the Proposal understates the Company’s true value and is not in the best interests of our shareholders.”
The letter seems to leave open the possibility that a sweetened offer might be considered, though the official position of the company is that transforming the LA Times into a global brand might be the ticket to turn around the company’s fortunes. It won’t be through organic growth, however, as the company recently moved to devastate its sales power by combining its publisher and ad director positions into one slot, making their editors now in charge of revenue growth.
Gannett reacted by confirming that it would proceed to contest the decision at the shareholders meeting, encouraging the rejection of
“This announcement reaffirms our concern from the outset that Tribune’s Board never intended to engage with us, necessitating that we make our proposal public,” John Jeffry Louis, Chairman of the Gannett Board of Directors, said. “It is unfortunate that Tribune’s Board would deny their shareholders this compelling, immediate and certain cash value by rejecting our offer without making a counterproposal or otherwise negotiating or providing any constructive feedback.”
Gannett’s response is that if Tribune wants a sweetened offer it should open up official discussions, allowing Gannett access to Tribune’s financial records.
“Our requests for access to due diligence that may enable us to improve our proposal continue to be denied to the detriment of Tribune’s stockholders,” Louis said. “Gannett has the financial capacity to fund this all-cash offer and our Board and management team are ready to negotiate a transaction with Tribune and committed to making this a reality. We have initiated a proxy campaign to solicit “withhold” votes in connection with the election of all eight nominees to the Tribune Board. This campaign will allow all Tribune stockholders the opportunity to send a clear message to Tribune’s Board that it should substantively engage with Gannett regarding its proposal. Send a clear message to the Tribune Board: Vote “WITHHOLD” for each nominee.”
Gannett does not have its own slate of board members up for consideration at the meeting, forcing it to lobby for the “withhold” vote.
“We think Ferro and his team have a better strategy for revitalising Tribune than the old team,” Matthew Brooks, CFA, from Macquarie Capital said today. “But when over 85 percent of sales are print and sales are falling 7 percent, we think it makes more sense to accept the Gannett offer than to accept the risks of a turnaround in a secularly declining industry.”
Tribune Publishing stock is down today a half a percent, in an otherwise up market.
Trinity Mirror today announced that its brand new daily tabloid, New Day, would be shuttered due to poor sales.
“Although The New Day has received many supportive reviews and built a strong following on Facebook, the circulation for the title is below our expectations. As a result, we have decided to close the title on 6 May 2016,” the company said in a trading update.
The company also reported that publishing revenue fell by 8.5 percent, with print declining by 10.9 percent while digital grew 15.7 percent.
Trinity Mirror is the UK’s largest newspaper group, with 240 regional papers as well as the national paper the Daily Mirror.
“Bad news I’m afraid but tomorrow’s edition of The New Day will be the last,” editor Alison Phillips wrote on the pub’s Facebook page. “We have tried everything we could but sadly we just haven’t reached the sales figures we needed to make it work financially.”
New Day was launched using a rather odd model: the tabloid would be print-only, eschewing a digital counterpart. At the same time, it would be a light, entertainment-oriented read. One might say that New Day was the equivalent of a typical new web brand, but in print only. The idea, apparently, didn’t work.
More layoffs are expected this week at The Boston Globe.
“Yet again in the world’s worst-kept secret category, we plan to put another buyout on the table, probably by the end of this week. These things aren’t really meant to be a secret. They just take a while to come together, despite our vast experience with them,” editor Brian McGrory said in a memo obtained by Dan Kennedy at Media Nation.
“To the obvious question of why, as in, why again, why so soon after the prior buyout of last autumn, the answer is pretty straightforward: The Globe’s numbers aren’t as good as our words (or photos, videos, and graphics). So we need to take down costs across the company, an exercise that virtually all other news organizations in the nation, legacy and digital-only, are focused on right now. Other parts of this building are doing this as well,” McGrory said.
Time Inc. today reported earnings before the bell, reporting a Q1 adjusted loss per share $0.11. The company’s CEO, Joe Ripp, has been promising that it would begin reporting revenue gains and to do that has been busy with acquisitions. The strategy worked in so far as Time Inc. was able to report that total revenue grew $10 million or 1 percent in the first quarter of 2016.
Print advertising decreased $10 million or 4 percent in the quarter. The company blamed slower magazine page sales, though the company has driven this with a series of layoffs and the consolidation of publisher positions. Recently the company announced that TIME, Fortune and Money would be run by group publisher Meredith Long.
“Our acquisition of Viant is enhancing the breadth and depth of our first party data. It will enable us to deliver advertisers’ messages to specific audience segments across all their connected devices, and to measure the true sales impact,” CEO Joe Ripp said today in the earnings statement.