Gannett Walks Away From Deal to Buy L.A. Times Publisher Tronc

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A handshake deal was poised to put the owner of the Los Angeles Times in the hands of the owner of USA Today, but financing fell through.
A handshake deal was poised to put the owner of the Los Angeles Times in the hands of the owner of USA Today, but financing fell through. Credit: Andrew Harrer/Bloomberg

Gannett Co. has dropped its bid for rival Tronc Inc., ending a months-long pursuit that would have put some of the biggest U.S. newspapers under one roof.

Gannett's decision ends a roller-coaster ride for both publishers, with Tronc Chairman Michael Ferro initially rebuffing Gannett's overtures in favor of a plan to produce more video and distribute stories to more readers. Gannett had made two previous public offers -- one in April for $12.25 a share and a second in May for $15 a share. Tronc's board rejected both as too low and not in shareholders' best interests.

The companies finally had a handshake deal the first week of October for Gannett to buy Tronc for about $18.75 a share, a person familiar with the matter said. Gannett was unable to get financing for the transaction, said the person, who asked not to be identified discussing private information. Shares of Tronc tumbled 15% to $10.25 in early trading. Gannett surged 7.6% to $8.36.

Gannett, the owner of USA Today, was trying to buy Tronc to create a company with the scale to compete more aggressively with online news sites for national readers and advertisers. The deal would have married Gannett's portfolio of more than 100 dailies and 1,000 weeklies with Tronc's Los Angeles Times, Chicago Tribune, San Diego Union-Tribune, Baltimore Sun, Orlando Sentinel and other publications.

Though Gannett is already the biggest newspaper publisher in the U.S. by daily circulation, Tronc offered something Gannett lacks: big-city newspaper brands with national reach. After USA Today, Gannett's most widely circulated paper is the Arizona Republic.

The collapse of the deal likely won't change McLean, Virginia-based Gannett's acquisitive streak. So far this year Gannett has purchased Milwaukee Journal Sentinel publisher Journal Media Group; North Jersey Media Group, the owner of the Record of Bergen County; and ReachLocal, a digital marketing firm that serves local businesses. Last year Gannett bought 15 dailies.

Besides Tronc, the only other major publicly traded national newspaper chain left in the U.S. is McClatchy Co., which owns the Miami Herald, Charlotte Observer and Kansas City Star. Other peers include closely held Cox Newspapers, Hearst Corp., and the Newhouse family's media holding company, Advance Publications Inc.

Last year, the business saw the most deals for the largest amount of money since the 2008 financial crisis, according to Dirks, Van Essen & Murray. The firm, which specializes in advising on newspaper mergers and acquisitions, said 70 daily papers were sold in 2015 for a combined $827 million.

With Gannett out as a suitor, the pressure is on Mr. Ferro to make his digital strategy a success. To fend off Gannett, Mr. Ferro sold enough stock in May to long-time friend, billionaire Patrick Soon-Shiong, at $15 a share to make Shiong's Nant Capital the second-largest shareholder, edging out Oaktree Capital Management. Mr. Soon-Shiong said he wants to use technology he's developed to transform the experience of reading a print newspaper.

Mr. Ferro renamed the Chicago-based newspaper chain, formerly known as Tribune Publishing, amid the hostile takeover attempt.

-- Bloomberg News

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