It has been a quiet summer since publishing conglomerate Gannett first offered $815 million for Tronc, formerly known as Tribune Publishing.
Gannett owns USA Today and 107 other news outlets, while Tronc owns the Chicago Tribune, the Los Angeles Times, the Orlando Sentinel, and five other newspapers.
It has been widely reported that Gannett has recently upped its bid for Tronc, raising two main questions: Will Tronc counter-offer, and would the acquisition be enough to boost Tronc’s revenue?
As the tension around the potential acquisition builds, here are five reasons why this back-and-forth between Gannett and Tronc means a lot more than simple cat-and-mouse:
Ferro Gets Rich
Michael J. Ferro, Tronc’s chairman and largest shareholder, initially paid $44 million ($8.50 per share) for a 17 percent stake in the company. Ferro has been rejecting bids from several other companies seeking to purchase Tronc, and in doing so, has successfully raised the value of the company to a record level by utilizing a “just say no” defense. If the final counter-bid from Gannett tops $25.00 per share, Ferro will be getting a payday worth three times the size of his initial investment in the company.
Gannett’s latest bid comes in at around $18.50 per share, which was 20 percent higher than its previous offer. Tronc is expected to counter the offer at an even larger premium, so if Gannett is successful in wooing it, Gannett will mark its biggest win in the company’s recent history of other media acquisitions. While Tronc has been struggling to stay afloat, Gannett has been buying up other news publishers. The partnership could be a match made in heaven, and the two might just save each other.
A Prisoner’s Dilemma
If Gannett does end up dropping its bid, Tronc shares are expected to go down. So, both Gannett and Tronc could benefit from an acquisition in the long-term. Tronc’s strategy of playing hard-to-get with Gannett may be working now in terms of raising its own share price and increasing cash-exclusive revenue, but if the deal goes through, it could potentially be looking at a sharp decline in stock price.
The Tail End of Tronc
Tronc’s operating performance and structure still sits in an uncertain condition in the eyes of shareholders and economists alike. What would the organization of Tronc look like after Gannett puts away its wallet? Tronc’s rebranding already confused news industry folk and marketing professionals, but a more streamlined publishing option could be on the horizon if Gannett’s purchase comes to fruition. And this reorganization may be just what Tronc needs. Tronc has been in the middle of a shareholder suit in Delaware courts that has some questioning the status of its leadership and how it could change if bought out by Gannett. Not to mention, Tronc has been keeping deliberations on the acquisition under wraps, and many investors aren’t happy that company leadership has been considering Gannett’s buyout without consulting them.
It is no secret that Tronc is a big deal. With Ferro’s talk of Tronc’s endless developing partnerships, its billionaire investors, and new innovative media capabilities, Tronc has the potential to be a leader in digital publishing. Gannett’s purchase of the company would mean that it would be on the forefront with Tronc in user-generated content, promotional advertising, and other secrets that the leaders of Tronc company have yet to unveil. If Gannett can win over Tronc, it could be the start of a partnership that could become a news household name and change the way we look at parent companies and their relationships with news media.