Gannett wants to buy Tribune Publishing for $815 million
In a statement Monday, the publisher of USA Today took public an offer it made on April 12, which was apparently turned down.
Tribune Publishing owns several newspapers including the LA Times and the Chicago Tribune.
Gannett chairman John Jeffry Louis explained why the company wants Tribune:
A combination with Tribune would rapidly advance Gannett's strategy to grow the USA Today network, the largest local to national network of journalists in the country, to include more local markets and new platforms, which we believe will benefit readers and result in significant and sustained value creation for Gannett stockholders.
The consolidation of both newspaper companies would also be aimed at cutting costs at a time of uncertainty for the industry. Gannett said it expects annual synergies of about $50 million.
Its offer represents a 63% premium to Tribune's closing share price on Friday of $7.52.
Tribune shares surged by as much as 60% in pre-market trading.
Gannett's release on Monday also included a letter from CEO Robert Dickey to Tribune CEO Justin Dearborn. Here's the full text:
Dear Mr. Dearborn:
We are disappointed by the response we received from you in your letter of April 22, 2016 regarding our proposal to acquire all of the outstanding shares of Tribune Publishing Company ("Tribune") for an all-cash purchase price of $12.25 per share, and Tribune's continued refusal to begin constructive discussions with us. We believe our proposal, which we first made in my letter to your Board dated April 12, 2016 and reiterated in several phone discussions with Michael Ferro and you since, is highly compelling for Tribune's stockholders and represents substantial value and immediate liquidity for them.
I want to remind you that Gannett's $12.25 per share offer price represents a 63% premium to Friday's closing stock price of Tribune, a 58% premium to the volume weighted average trading price over the past 90 days, and a multiple of 5.6x (including estimated pension and post-retirement benefits payable) your 2016 EBITDA estimate based on consensus research. The $12.25 per share offer price also represents a significant premium to the $8.50 share price at which Tribune recently issued common shares.
With our capability to commit to a deal without financing contingencies, we believe that Gannett is uniquely positioned to offer this level of premium to your stockholders and to quickly evaluate and finalize this transaction, allowing your stockholders to receive immediate and certain value.
As expressed previously, we believe the financial and strategic logic of a combination of our two companies is clear. The challenges for our industry in the digital age continue. Tribune has itself faced numerous challenges and leadership changes over the last few years. We believe Gannett is uniquely willing and able to propel Tribune into the position of strength that will allow its beloved and historic publications and other assets to survive and thrive in this challenging environment. By combining, we would create a company with the financial stability and flexibility equipped to preserve journalistic integrity, high standards and excellence for years to come. We would be able to both empower our journalists and facilitate the creation of exceptional content while delivering stockholder value.
Given the opportunity to benefit from the significant premium and near-term liquidity, we are confident that Tribune's stockholders will embrace our offer. As we have indicated previously, we would prefer to negotiate a transaction with Tribune, but we have determined that making your stockholders aware of our all-cash proposal is necessary, given Tribune's attempts to delay constructive engagement.
This matter is of the highest priority to us, and we continue to be ready to dedicate significant resources to completing due diligence and negotiating a transaction on an expedited basis. We have been working closely with our financial advisors at Methuselah Advisors and our legal advisors at Skadden, Arps, Slate, Meagher & Flom LLP and have completed an extensive analysis of the proposed transaction based on publicly available information. As well, we are confident that the regulatory approvals necessary to consummate the proposed transaction will be obtained.
This proposal, which is unanimously supported by our Board, is a non-binding expression of our current views, which remains, among other things, subject to satisfactory completion of due diligence, the negotiation, execution and delivery of a mutually satisfactory definitive merger agreement, approval of the definitive agreement by your and our Boards of Directors, approval of the transaction by your stockholders, and receipt of customary regulatory approvals.
Given the substantial value represented by our offer and the other compelling benefits of a combination of Gannett and Tribune, we are confident that Tribune's non-management stockholders will support our proposal. Continuing to refuse to engage in a dialogue with us will only serve to delay the ability of your stockholders to receive the value represented by our all-cash offer. We therefore are prepared to consider all alternatives to complete this transaction. In the meantime, we remain eager to meet with you and your team as soon as possible to progress the transaction.