Gannett Continues Its Spinoff Acquisition Spree With Offer For Tribune Publishing

Gannett (GCI) strikes again and it has another print spinoff in its crosshairs. After scooping up the Journal Media Group back in October, the company, which spun off its digital properties into TEGNA (TGNA), is now going after Tribune Publishing (TPUB), the 2014 print spinoff from Tribune Media. That is a lot of spinoff on spinoff M&A. Gannett’s all-cash offer of $12.25 per share represents an over 60% premium to last week’s close, but is still a massive drop in post-spinoff company value. The bid further highlights the strong execution of Gannett’s post-spinoff operating plan. At the time of its spinoff, CEO Robert Dickey said the company’s focus would be to grow via M&A and boy have they gone after companies with gusto.

This one might not be so easy though. Gannett’s offer noted that the company was frustrated with Tribune’s refusal ‘to begin constructive discussions with us’. Tribune stated it will review the proposal and respond as soon as feasible, but CEO Justin Dearborn was clearly upset with the public letter. Mr. Dearborn later accused Gannett of ‘playing games’ and of being both ‘erratic’ and ‘unreliable’. Insults. Accusations. This situation is heating up quickly!

It seems TPUB wants to retain its independence and management is not fully embracing a sale. That may have to do with some of Tribune’s internal plans and changes. In contrast to Gannett, Tribune has had trouble executing and clearly defining its strategy since going out on its own. ‘Digital’ just hasn’t happened. Back in February though, the company took in a cash infusion from entrepreneur Michael Ferro, who also became Chairman of the company. Shortly thereafter, he made a change at CEO, bringing in Mr. Dearborn to replace Jack Griffin. The company had planned to use the cash infusion in order to bid on Freedom Communication’s LA papers, but that plan was thwarted by the government. It may have other plans to restore its value though and as a result, it may feel like Gannett’s offer is a savvy attempt to pick up the asset on the cheap. Mr. Ferro is Tribune’s largest shareholder and stands to make quite a nice profit (albeit short term) if the deal is consummated. He is also obviously a believer in the company, so it will be interesting to see where his votes fall.

Interestingly, the deal is not currently expected to incur much trouble in achieving government approval, despite the government’s review of Gannett’s Journal purchase and the scuttling of Tribune’s Freedom Communications purchase. One reason cited for this lack of concern is that there is little geographic overlap between the entities, but I wouldn’t be surprised if this got a closer look. Newspapers hold a certain cache and take on more importance during election years.

Tribune Publishing is currently trading below the offer price, but many – here is the WSJ and The Boston Herald – think the offer may be too rich to pass up. Oaktree Capital and PrimeCap Management own ~26% of Tribune so they will also have considerable influence on its future. Of course, there are talks of potentially bringing in other bidders such as Apollo or some wealthy billionaires looking for some trophy assets.

For the most part, the print space has performed as expected, but the drama within its constituents has been anything but. With the CEO’s trading barbs, this should be an interesting one to watch play out.

Disclosure: Author holds no position in any stock mentioned.