Gannett said to be leaning toward dropping Tribune bid

Alex Sherman and Gerry Smith
Bloomberg News

Gannett Co. is leaning toward dropping its bid to acquire Tribune Publishing Co. as it expects Tribune shareholders to support the current board of directors, according to a person familiar with the matter.

Shares of Tribune fell as much as 13 percent to $10.04 on the news, and were trading at $11.26 at 11:48 a.m. in New York. Gannett was little changed at $15.39.

Gannett’s board is discussing its options and no decision has been made, said the person, who asked not to be identified because the discussions are private. The McLean, Virginia-based newspaper company is waiting to see how Tribune shareholders vote in today’s annual meeting before making a decision, the person said. Approval of the directors would amount to a tacit endorsement of Tribune Chairman Michael Ferro’s resistance to a Gannett purchase at $15 per Tribune share.

Gannett, which owns USA Today and local newspapers, is open to buying Tribune at a later date, the person said. Capital Structures Realty Advisors LLC, a Tribune investor, has sued the media company’s directors for failing to engage with Gannett on its $864 million buyout offer. Gannett has said it would review whether to proceed with its bid after Tribune’s shareholder meeting.

“It is evident from our discussions with Tribune shareholders that there is overwhelming support for the companies to engage immediately regarding our proposed transaction,” John Jeffry Louis, Gannett’s chairman, said in a statement last month after the company increased its offer to buy Tribune. Several large shareholders, including Oaktree Capital Management, Towle & Co. and Mount Flag LLC, are seen supporting Gannett at today’s meeting. Still, Gannett expects to only get between 25 percent and 35 percent of the total vote, the person said.

Tribune’s maneuvers to block a deal with Gannett, including installing a so-called poison pill, have been supported by three independent proxy voting and corporate governance advisory firms: Institutional Shareholder Services Inc.; Glass, Lewis & Co.; and Egan-Jones.

Gannett has waged a hostile takeover battle for Tribune’s portfolio, which includes the Chicago Tribune and Los Angeles Times, since April. The company made two offers — one in April for $12.25 a share and a second in May for $15 a share. Both included the assumption of debt, which was $385 million as of March 27. Tribune’s board rejected the bids as too low and not in shareholders’ best interests.