Obsessive Gannett reportedly continuing its pursuit of wily newspaper rival
The publisher of USA Today looks to acquire publisher of metro papers in Los Angeles and Chicago, and at price more than double what the market had valued the company at just nine months ago
Politico’s Ken Doctor appears to believe tronc, the publisher of the Los Angeles Times, Chicago Tribune and other newspapers, has received another offer from Gannett, one delivered during a recent meeting in LA. There is no reason to doubt the story he is reporting: Gannett has been pursuing the newspaper company like a dog chasing a fire truck, committing M&A malpractice, and guaranteeing tronc CEO Michale Ferro and investor Dr. Patrick Soon-Shiong will have made a huge profit on their investment in the newspaper company.
This saga started in February of this year when Michael Ferro invested $44 million in Tribune Publishing, a way for then CEO Jack Griffin to secure a much needed cash infusion, one needed if Tribune Publishing was to end up putting in a bid to acquire the assets of Freedom Communications. Those assets included the Orange County Register, the one large-ish newspaper between LA and San Diego. Griffen has successfully acquired the San Diego Union-Tribune the year before and now wanted to complete the regional strategy.
But Ferro ousted Griffin, and brought in his own guy to formally run Tribune Publishing. Gannett’s CEO Bob Dickey then saw his own opening. Gannett believes the hope for newspapers in consolidating the industry, having enough name-brand papers in major cities that national advertisers will include the company in its ad campaigns. So in April, with Tribune stock valued at $7.52 a share, Gannett offered to buy Tribune Publishing for $12.50 a share. What a deal!
The offer drove the price of Tribune Publishing stock up, giving Ferro an instant profit, and depressing any real need to accept the offer. Gannett responded by raising their offer to $15 a share, driving the price of the stock up again.
Meanwhile, Tribune Publishing won the bankruptcy auction bid for the Orange County Register, only to have the Justice Department intervene claiming a Tribune win would create a monopoly, so the Register was awarded to Digital First Media, a company with lots of papers in the LA area, a history of going bankrupt, and is owned by a private equity company that would really love to exit its investment. You can’t say the people in the Department of Justice don’t have a sense of humor.
Ferro licked his wounds and proceeded to make some changes at Tribune Publishing. He got rid of the publishers, gave the editors the vacant titles, changed the name of the company to something more appropriate for teenage action toy figure, and told the world of his plans for using artificial intelligence to deliver content to readers.
That would have driven away a more sane company, but not Gannett. They have acquisition madness in their blood now and can’t stop themselves. Anyone in the M&A business can tell you they’ve seen this before, it is what happens when a company decides that buying something is the right thing to do. They fantasize about the acquisition, convince themselves of its merits, and then over pay to complete the deal.
So, Ken Doctor thinks Gannett has offered $18 a share, and believes tronc will counteroffer at $20 and the deal will be done. That makes sense, and Doctor is a smart guy who knows the newspaper business – in fact, he is the only professional ever quoted by media people when they need a quote for a story on the newspaper business.
In the end, maybe the tronc papers would be better off being owned by Gannett. Dickey is a newspaper guy who still believes that advertising matters and he doesn’t talk mumbo jumbo in order to try and sound impressive. On the other hand, Gannett papers and their websites are terrible, and clearly Dickey hasn’t surrounded himself with competent M&A professionals. The goal here should have been to depress the price, not inflate it, to make Ferro worry that he would lose his investment, not dream about what Greek island he will buy after the deal is completed.
Doctor is clearly no fan of Michael Ferro, talking about his “intangible ego” – but Ferro is winning this game, and the old pro newspaper pros are looking pretty amateurish. In the end, Gannett may well win tronc (though I’ve been betting all along that no deal will be completed until after the November election), but Gannett will be loaded down with debt, will have been spun off of its parent company without important digital assets, and still produce McNewspapers. Makes one wonder what “winning” might really look like.