Dex Media files for Chapter 11 bankruptcy protection; Pacific Magazines launch new sites for Women’s Health, Men’s Health
Morning Brief: Gannett sends Tribune Publishing’s board of directors letter with offer details, hoping the board will ‘agree that the offer is so compelling that they will begin constructive negotiations with Gannett immediately’
The phone book company Dex Media has filed for Chapter 11 bankruptcy protection. The prepackaged plan of reorganization, along with voluntary petitions, was filed in the U.S. Bankruptcy Court for the District of Delaware.
As of the end of last year, Dex Media finds itself with $2.65 billion in debts, and only $1.27 billion in assets.
“Today’s developments are important milestones in our continued progress toward establishing a capital structure that will support our new strategy and enable our growth,” said Dex Media President and CEO Joe Walsh. “Our Plan meets a critical need for our future – a capital structure that will significantly reduce our indebtedness and provide us with the financial flexibility and strength we need to achieve our growth objectives and remain a strong partner to the local businesses we are committed to supporting across the country.”
Dex Media gave details of its reorganization plan:
- Dex Media’s senior secured lenders will exchange their current $2.12 billion of claims for a new $600 million new first-lien term loan; 100% of the equity of the reorganized Dex Media, subject to potential dilution from a management incentive plan; and a cash distribution upon emergence from bankruptcy.
- The Company’s unsecured noteholders will receive a $5 million cash payment and warrants to purchase up to 10% of the post-reorganized equity.
- All allowed trade vendor claims will be paid in full.
The company said it has enough cash on hand to avoid needing a new loan, and continues to generate positive cash flow to fund its ongoing operations, including paying employees.
Dex Media was founded in 2013 following the merger of two publishers who had filed for bankruptcy, Dex One and SuperMedia. As the need for printed phone directories has fallen, the company has become more of a digital marketing company, providing its information through apps and websites, while providing its advertisers digital marketing solutions more than print, though it still sells Yellow Pages advertising.
Pacific Magazines, the magazine publisher in Australia and New Zealand owned by Seven West Media, is launching its own magazine branded websites, after previously partnering on them with Yahoo7 – itself a partnership between Yahoo and the Australian media company. The latest to be launched are for Women’s Health and Men’s Health.
“The teams have worked exceptionally hard over the last month to deliver on our ambitious commitment to launch 12 new sites by the end of June,” Pacific Magazines CEO Peter Zavecz said in the announcement. “These mobile first, data optimized digital products have set new benchmarks with the audience and commercial partner reaction and daily traffic to date exceeding all expectations.”
Earlier this year the publisher had announced that sales and editorial control for the magazine titles would be taken back from Yahoo7, who would still supply native advertising for the websites.
“Our clients will benefit from a single solution across all platforms, whilst the consumer experience will be seamless across publishing, social, video and online. This will drive our deep expertise in content, brands and categories whilst completing our multi-platform offering and total audience footprint,” Zavecz said at the time.
The new websites still come up in a Google search as having Yahoo URLs, but the sites now bounce to new addresses.
Earlier this month Pacific Magazines launched new sites for their Marie Claire and Who magazine brands.
Yesterday, Gannett continued its effort to acquire Tribune Publishing, increasing its original offer to pay $12.25 up to $15 a share.
Tribune’s response was basically ‘yeah, we received the offer, we’ll look at it.’
Some industry observers believe it will be hard for Tribune management to turn down the offer, especially with the company’s second largest shareholder, Oaktree Capital Management, supportive of a sale. But I give the prospects for a deal no more than a 50-50 chance. I have two reasons for feeling this way.
First, the offers have already drive the price of TPUB stock over $14 a share. It is likely that Chairman Michael Ferro would tell anyone wishing for a sale that now might be a good time to sell their shares. Second, having lived in the Chicago area for many years now I see corporate management people as very different here than on, say, the West Coast. If TPUB was owned by a group of Bay Area executives the discussion today would be about what to do with all the money they are about to make. Chicago executives have a history of saying no to offers they really have no right to refuse (read: Groupon). Also, Ferro bought into the company for reasons beyond making a profit, otherwise he would never have invested in the company that owns the Sun-Times.
Still, there is chance Gannett may well win its prize.
Gannett this morning passed on to TNM the letter it sent yesterday to the Tribune Publishing board of directors. Here it is:
VIA ELECTRONIC MAIL
May 16, 2016
Board of Directors
Tribune Publishing Company
435 North Michigan Avenue
Chicago, Illinois 60611
c/o Mr. Justin C. Dearborn, Chief Executive Officer & Director
I am writing to inform you that the Gannett Board of Directors has approved an increase to $15.00 per share (the “Purchase Price”) for our all-cash offer to acquire all of Tribune Publishing Company (“Tribune” or the “Company”). Our increased offer is based on our review of Tribune’s most recent 10-Q filing (including changes to debt, cash balance and pension liabilities). In addition, after further review, we have greater confidence in our ability to yield additional operational improvements in this transaction.
This Purchase Price represents a 99% premium to the unaffected stock price on April 22, 2016, the last trading day before we made our $12.25 per share offer public. We note that the $15.00 per share offer price also represents a 76% premium to the $8.50 share price at which the Company recently issued common shares. Our offer continues to be free of any financing condition.
We trust that the Board of Directors, in line with its duties to Tribune shareholders, will agree that the offer is so compelling that they will begin constructive negotiations with Gannett immediately.
We believe that we have a unique opportunity right now to create an even stronger, industry-leading multi-platform media company committed to high-quality “local-to-national” journalism through our USA TODAY NETWORK. Given the benefits of an acquisition of Tribune, its high-quality assets, and its talented employees, we also believe that time is of the essence to proceed with this transaction.
As we have indicated previously, our offer price is based on our review of publicly available information, and remains subject to due diligence. We are prepared to begin working on due diligence immediately. This offer remains conditioned upon execution of a definitive purchase agreement with representations, warranties, and covenants customary for public company transactions of this type. We anticipate that the drafting and negotiation of the agreement could be accomplished concurrently with our confirmatory diligence process. This proposal has been reviewed and approved by Gannett’s Board; any definitive transaction agreement remains subject to final approval from Gannett’s Board.
We look forward to hearing from you and to pursuing this mutually beneficial, highly compelling transaction.
GANNETT CO., INC.
Most media observers think that the only way Gannett can make an acquisition of Tribune Publishing work is for their to be massive layoffs following the deal’s completion. These are called efficiencies in the publishing business – or turning a local metro paper into a McPaper.
But there is one position Gannett would not have to eliminate: that of music critic at the Los Angeles Times. That spot is already vacant after music and culture writer Sasha Frere-Jones left the paper following the discovery that his $5K expense report was for entertainment at a venue that was later discovered to be a strip club, The Wrap reported.
Oops. But later, after Frere-Jones was no longer employed at the paper, it was discovered that hec was planning on going on a trip sponsored by Dom Pérignon. The paper said that their music critic is now planning on freelancing in preparation for writing a book. Good idea.
In the end, that’s one position Gannett would not have to eliminate. After all, it can always cover the NYC and LA music scene with another of its reporters, say someone out of the Indy Star, for instance.