Editorial: Make Me an Offer

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When I read the news in late April about Gannett’s $815 million offer to buy Tribune Publishing, it felt like a scene right out of “The Godfather,” “I’m gonna make him an offer he can’t refuse.”

But things didn’t turn out that way. A week after the offer went public, Tribune Publishing rejected Gannett’s bid to buy the company stating: “Tribune Publishing’s board has unanimously determined that Gannett’s opportunistic proposal understates the company’s true value and is not in the best interests of its shareholders.”

According to USA Today’s Roger Yu, Gannett’s offer price was about 5.6 times Tribune’s estimated 2016 earnings before interest, taxes and other items. Gannett’s deal would have also assumed $390 million of Tribune’s debt, Yu reported.

In today’s tumultuous media industry, imagine getting a clean slate and handing over your debt to another organization. But that also means handing over your business. If the bid had been successful, Gannett, which owns USA Today and more than 100 media properties, would have expanded to include newspapers like the Los Angeles Times, Chicago Tribune and Baltimore Sun.

Instead, Tribune didn’t see Gannett’s unsolicited offer as a white knight. Tribune Publishing chairman Michael Ferro was quoted saying Gannett was “trying to steal the company.”

In a Los Angeles Times interview, Ferro said, “I believe 100 percent in my heart that this is completely a manipulation, that they’re trying to steal the company, bum-rush us. It is ungentlemanly, it is not what we do in this industry. It is not the way we do business.”

If this was a scene from “The Godfather,” I bet director Francis Ford Coppola would have had Ferro and Gannett CEO Robert Dickey sitting in the back table of some darkened restaurant discussing these “ungentlemanly” business negotiations. In the end, Ferro walked away from the deal, but was that a wise decision? Only time (and money) will tell.

The same day Tribune rejected the offer, Tribune Publishing CEO Justin Dearborn announced a plan that the Los Angeles Times would expand overseas by next year in seven new foreign bureaus with strong entertainment markets. They include Hong Kong, Seoul, Mexico City, Rio de Janiero, Mumbai, Lagos and Moscow.

“Tribune Publishing is in the early stages of a compelling transformation, with a well-defined strategic plan to drive increasing monetization of our important brands, capitalize on the global potential of the LA Times and significantly accelerate our conversion of content to revenue through an enhanced digital strategy,” Dearborn said in a statement.

With such an ambitious plan intact, it seems as though Tribune isn’t quite ready to surrender. After all, it had recently lost to Digital First Media in acquiring the Orange County Register and Riverside Press-Enterprise in Southern California; even though their bid was higher, the Department of Justice had stepped in with a lawsuit stating “serious” antitrust issues. By not turning over its newspaper assets to Gannett, Tribune still wants to prove they’re a media powerhouse.

On the other hand, maybe Gannett isn’t ready to give up its pursuit either. Maybe by the time you’re reading this editorial, Ferro and Dickey are pulling up their chairs again, this time with a new deal on the table, one that Ferro and the rest of his board can’t refuse. Let’s just hope the results don’t end with a horse’s head in someone’s bed.

Editor’s Note: Ferro has since turned down a second offer made by Gannett.

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Published: June 2, 2016

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