Published On: Mon, Apr 16th, 2018

Tronc in Play: Apollo, Gannett May Buy All or Pieces

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Tronc Inc.’s days as an independent company are likely numbered.

The publisher of the Chicago Tribune and New York Daily News is reportedly drawing takeover interest from Apollo Global Management and SoftBank Group Corp. as well as Gannett Co., which abandoned its 2016 pursuit of Tronc after banks balked at the high valuation contemplated for such a struggling business. The renewed attention comes as Michael Ferro, the mastermind of the company’s “just-say-no” strategy on Gannett’s bid, sells his roughly 26 percent stake in Tronc to McCormick Media. Ferro stepped down as Tronc chairman in March, mere hours before Fortune magazine published a story detailing accusations of sexual misconduct.

The writing was on the wall for Ferro’s exit after he agreed in February to sell the L.A. Times, one of the crown jewels in Tronc’s portfolio and the linchpin of his turnaround plan, to biotechnology billionaire Patrick Soon-Shiong for $500 million plus the assumption of pension liabilities. Soon-Shiong acted as a white-knight investor in the fight against Gannett, but had a feisty following-out with Tronc over corporate-governance concerns as Ferro tightened his hold over the board. The L.A. Times sale has yet to close and there’s speculation Soon-Shiong is having second thoughts about the rich price, or could decide to buy all of Tronc instead.

California Dreamin’

Tronc isn’t setting any records with the sale of the L.A. Times and other California papers, but the divestiture does imply a higher valuation for the whole company than what Gannett offered

Source: Bloomberg

Where this will all end up is anyone’s guess, but a sale to someone seems like a good idea. To Ferro’s credit, he stabilized Tronc and returned the company to profitability. But he got there largely via cost cuts, not the artificial intelligence overhaul of the journalism business model that was promised. The acquisition of the Daily News in September for a symbolic $1 offered synergies, but also saddled the company with about $100 million in operational and pension liabilities and weighed on its 2017 results. It’s time for a new strategy, and Tronc will be better able to formulate that as part of a larger company or in the private market.

All of these moving parts and buyers suggest a carve-up of the Tronc portfolio as a plausible outcome, with a handful of buyers taking the parts that most interest them. The name Tronc, after all, is derived from a British term describing a tip jar and was meant to represent a “pooling of resources,” per the company.

Soon-Shiong has much to learn about how to run a newspaper and his plans for doing so successfully are still unclear. He will have enough to do with just the L.A. Times and Tronc’s other California papers without adding its myriad other titles. McCormick Media is connected to the descendants of the family that backed the Chicago Tribune for much of its history, according to the paper. It’s conceivable that’s the main source of its interest.

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