Let’s kick off the week with some deal talk. Last week we touched on Apollo’s (APO) potential buyout of Arconic (ARNC) and if completed, it would just be another example of spinoff/parent company being taken out. Once the separation announcement is made or even the ‘strategic alternatives’ one, the market knows that a sale is possible. In that vein, lets take a look at some other spinoff related M&A news, including some we missed during our hiatus:
- The WSJ is reporting that hedge-fund backed Digital First Media is making a bid for Gannett (GCI), the publisher of USA Today and several other major papers. DFM has built up a 7.5% stake in GCI and is pushing the publisher to sell itself. According to the WSJ, DFM even made a $12/share offer in order to move the process along. Gannett was a 2015 Summer of Spin off from TEGNA (TGNA and an overall terrible name) back in 2015, which means it now also has a sibling in Cars.com (CARS). You don’t need to be an MBA to know that the print business is struggling in the digital age, but Gannett has made an active effort to consolidate and cut costs in order to survive. It acquired 2015 spinoff Journal Media Group and also bid hard on Tribune Publishing(TPCO) (then known as Tronc, another nominee for worst spinoff names). Apparently, those talks were still ongoing right up until DFM came along. DFM has aggressively cut expenses (aka people) at the papers its acquired and some have even accused the company of interfering with the editorial decisions. As a result, some are calling this a disaster for the newspaper industry and not surprisingly the NewsGuild is against the purchase. This should be a fun one to watch.
- Speaking of Cars.com, the company announced last week that it has been undertaking a “review of strategic alternatives”. The announcement follows months of pressure form activist fund Starboard Value, including this letter sent last month.
- Catching up on some older news and continuing with the print media theme, Quad Graphics (QUAD) is acquiring 2016 RR Donnelley(RRD) Spinoff LSC Communications (LKSD). The offer was all-stock and initially valued LKSD at $1.4b, including debt. The move further consolidates the publication printing business and is yet another deal in a struggling industry searching for economies of scale. The Quadracci family will retain voting control of the combined company and Joel Quadracci will become Chairman, CEO and President (someone sure thinks highly of themselves). The deal is expected to close in the first half of 2019.
- Going back to the summer, Coca Cola (KO) is acquiring Whitbread’s (WTBCF) Costa coffee shops. The ~$5.1b deal was announced shortly after Whitbread caved to activists and announced plans to spin the company off in perhaps the slowest spinoff ever. The timeline was almost 3 years, but alas, no more. Unfortunately, this is a common phenomenon in the spinoff arena. Once a company is on track to be separated, it also means its in play so sometimes buyers swoop in before it hits the market. Just like Arconic, this was another win for Paul Singer’s Elliott Advisors.
Disclosure: Author holds no position in any stock mentioned.