Gannett Co. (NYSE: GCI), publisher of USA Today, made an $815 million unsolicited bid for Tribune Publishing Co. (NYSE: TPUB), seeking to add the Los Angeles Times and the Chicago Tribune to its newspaper portfolio.
Gannett offered $12.25 in cash per Tribune share, a 63 percent premium to Tribune’s closing price on April 22, according to a statement Monday. The company, which also publishes the Arizona Republic and the Detroit Free Press, first made an approach for Tribune on April 12 and said Tribune refused to engage in discussions. Tribune said Monday it has hired Goldman Sachs Group Inc. and Lazard as financial advisers and Kirkland & Ellis LLP as a legal adviser to consider Gannett’s offer.
Shares of Tribune soared 56 percent to $11.72 in early trading. The offer price includes the assumption of $390 million in debt, Gannett said.
For the owners of daily newspapers, buying competitors and slashing costs has become a way to buy time while figuring out how to make more money online. That was the logic behind the recent attempt by Tribune to buy two Southern California newspapers, a move the company abandoned after the U.S. Justice Department angled to block on competitive grounds. Gannett and Tribune have little overlap in large markets, which could help win regulatory approval.
Last year, the newspaper industry saw the most deals for the largest amount of money since the 2008 financial crisis, with 70 daily newspapers being sold for a combined $827 million, according to mergers-and-acquisitions adviser Dirks, Van Essen & Murray. Gannett bought 15 dailies, including the Milwaukee Journal Sentinel; Tribune snapped up the San Diego Union-Tribune; and Warren Buffett’s newspaper chain acquired the Free Lance–Star in Fredericksburg, Virginia.
“For better or worse, Gannett is doubling down on newspapers,” said Paul Sweeney, a Bloomberg Intelligence analyst, in an e-mail. “The industry fundamentals remain brutal, yet Gannett apparently sees value in getting bigger.”
Gannett’s approach comes amid changes in leadership and strategy at Tribune, led by new non-executive chairman Michael Ferro, who acquired a 16.6 percent stake in the company in February. Less than a month after his investment, Tribune ousted Chief Executive Officer Jack Griffin. That followed the firing in September of Los Angeles Times Publisher Austin Beutner after little more than a year on the job.
The publisher has combined the roles of editor and publisher across its portfolio of newspapers. Its flagship paper, the Chicago Tribune, is implementing a metered paywall, meaning readers could access up to 10 articles a month online before being asked to pay for a subscription.
Both companies have been struggling with declining circulation and ad revenue. Newspaper ad spending is expected to plunge 75 percent to $12 billion in 2016 from 2005’s $49 billion peak, according to Magna Global. Print has been steadily losing share to digital ads and the future looks bleak, with a projected $5 billion in newspaper ads for 2019, Geetha Ranganathan, a Bloomberg Intelligence analyst, wrote in a recent research note. “This emphasizes the need for a viable digital strategy in circulation and ads,” she wrote.