The cause of this week’s mysterious last-minute delay in the proposed acquisition of Tronc (formerly Tribune Publishing) by Gannett has been revealed. According to Bloomberg, which first reported the news, banks that were supposed to be involved in financing the deal apparently got cold feet.
That puts everything on hold while Gannett looks into possible alternative sources of funding.
Citing unnamed sources familiar with the negotiations, Bloomberg reports that several potential lenders pulled out because they believe Gannett’s latest offer of $18.75 per share overvalues Tronc significantly.
Bloomberg did not specify which banks were involved, but previous reports have named Jefferies LLC and SunTrust Banks Inc. as two potential players.
News of the setback set Tronc’s stock price tumbling from $15.66 at mid-afternoon to $12.27 by the end of trading, a 22% drop, triggering a temporary halt in trading at one point. Over the course of the day, Gannett’s stock price tumbled 18% from $9.85 to $8.08 before rebounding somewhat to $8.21 per share, its lowest price in over a year.
The possibility that the deal will be called off is especially bad news for Tronc shareholders, who stood to dispose of their stock at a premium of 140% over its price, before negotiations between the companies began.
Following Gannett’s acquisition offer in April, Tronc’s stock price climbed from $7.52 to a recent high of around $16.70. Over the same period, in response to repeated rejections, Gannett has raised its bid from an original offer of $12.25 per share to $18.75 currently.
Like other big newspaper publishers, Gannett is struggling with declining print ad revenues as it makes a rocky transition to a primarily digital media company. On Thursday, the company revealed that print advertising revenues tumbled 14.8% in the third quarter, compared to the same period last year, due in part to a 35.1% drop in national print advertising.
That contributed to an 11.7% drop in total ad revenue, to $339.3 million. Circulation revenues were down 6.4% to $248.3 million.
Overall total revenues for Gannett’s core business, not counting recently acquired newspapers, sank 8.6% from $693.8 million to $634.4 million. Digital ad revenues increased 6.2% to $98.8 million.