Gannett boosted its all-cash offer to acquire Tribune Publishing to $15 per share, raising the stakes after the Chicago-based owner of the Chicago Tribune, Los Angeles Times and other major newspapers earlier this month rejected an unsolicited $12.25-a-share bid.
The revised offer, disclosed in a Securities and Exchange Commission filing Monday, values Tribune Publishing at $864 million, rather than $815 million, including the assumption of debt.
The sweetened bid is nearly double the price that Tribune Publishing's stock was trading at before Gannett made its initial offer public on April 25. It increases pressure on Tribune Publishing's board to open the door to discussions in advance of the company's annual meeting June 2, where Gannett is enlisting shareholders for a mostly symbolic proxy fight.
"We're looking for the board to … move forward so that we can get in and start our due diligence," said Robert Dickey, president and chief executive officer of Gannett. "We're ready to go tomorrow, if they give us the heads-up."
Tribune Publishing confirmed receipt of the higher bid Monday and said in a news release its board will "thoroughly review" Gannett's revised proposal.
The higher offer reflects additional analysis of Tribune financial statements filed earlier this month, and Gannett's "greater confidence in its ability to yield additional operating improvements" in the transaction, the company said. Gannett previously said it would save $50 million annually through the Tribune Publishing acquisition.
Cowen and Co. analyst Lance Vitanza said Monday the increased bid should get both sides talking, with perhaps a less hostile dynamic.
"It's certainly a step in the right direction," Vitanza said. "It leaves us increasingly confident that a consensual transaction will ultimately occur."
Gannett and Tribune Publishing leadership met Thursday in Chicago, but reported no progress, according to a Gannett filing Friday.
At the meeting, Tribune Publishing Chairman Michael Ferro detailed a recently unveiled digital strategy named "Tronc" that he said would create more value for shareholders, Dickey said Monday.
Monday's increased offer was based on financial information gleaned from Tribune Publishing's first-quarter earnings report, which revealed more cash on the books, slightly lower debt and reduced pension liability, Dickey said. It was not based on Tribune Publishing's revised long-term earnings projections or Tronc.
"We met with Michael last Thursday for two hours," Dickey said. "He spent most of his time focused on Tronc. Having been in this business for a number of years, I walked away not convinced that Tronc was going to solve the problems, based on some of the infrastructure issues that Michael pointed out."
Tribune Publishing CEO Justin Dearborn defended the company's new digital strategy in a statement Monday afternoon.
"There's no question that the publishing industry has been turned upside down, and we have been very clear that a fundamentally new approach is necessary to succeed," Dearborn said. "We are leveraging new technology to enable us to monetize our content and dramatically expand revenue and profitability going forward."
Ferro became Tribune Publishing's largest shareholder in early February when his investment firm, Merrick Media, bought a 16.6 percent stake in a $44.4 million deal that priced the stock at $8.50 per share.
McLean, Va.-based Gannett, publisher of USA Today and more than 100 other newspapers, initially offered to buy Tribune Publishing for $12.25 per share in an all-cash deal that included the assumption of $390 million in debt. Tribune Publishing's board voted unanimously to reject the offer May 4. Tribune Publishing's board adopted a "poison pill" May 9, which could discourage Gannett from going directly to Tribune Publishing shareholders with a tender offer.
Tribune Publishing's second-largest shareholder, Los Angeles investment firm Oaktree Capital Management, said earlier this month it wants the Chicago-based newspaper to explore a possible sale to Gannett. Oaktree owns 14.8 percent of Tribune Publishing.
Gannett is launching a proxy campaign among Tribune Publishing shareholders, asking them to withhold their votes to elect the company's board for the annual meeting. It is also talking directly with the larger Tribune Publishing shareholders to try to move a deal forward.
"Our team has had conversations with shareholders and I think they're very concerned about a scenario where a deal does not get done here," John Jeffry Louis, chairman of Gannett's board of directors, said Monday. "I think they want this Tribune board to engage with us, to begin a conversation, let us get through the door and begin to do our due diligence, so we can understand exactly what these two companies look like together."
Dickey said combining Gannett and Tribune Publishing would create a "sustainable model" in an industry that has seen declining revenues for years, as legacy newspapers struggle to navigate the evolving digital media landscape.
"We want to be the largest digital news network in America, and we're on track to do that," Dickey said. "And by doing that, we can build a model that gives our employees some stability and gives our shareholders value."
In his statement, Dearborn acknowledged the "tremendous synergies" of combining the companies, but said Tribune Publishing's new strategy would lead to sustainable success.
"The path to success requires an innovative new approach that reinvents the publishing business model — you can't cut your way to growth and sustainable profitability," Dearborn said. "We are confident that we have the plan, technology and the team necessary to drive growth."
Tribune Publishing's stock was up nearly 23 percent to close at $14.08 per share Monday.