Gannett Outlines Its New Waiting Game
Gannett CEO Bob Dickey is slowing down in his quest to acquire Tribune Publishing, but he has no plans on stopping.
Today, Dickey’s Gannett took a public deep breath – and vowed to persist in its unwanted wooing of Tribune. Surprising some, Gannett put no more money on the table. The company said its low-key ardor would persist at least until the end of summer.
First published on POLITICO Media
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“Gannett values the 11 iconic newspapers of Tribune and has determined to keep its offer in place as it evaluates various near-term developments, including the Tribune second quarter 2016 financial results, which are expected in August,” a company statement said.
That waiting game makes a fair amount of sense, and was one of Gannett’s three alternatives I outlined last week.
One alternative was to simply walk away, but Bob Dickey wants to win this battle, both to build his company as The Last Man Standing in American newspaperdom and to show he can’t be beaten by the unorthodox Michael Ferro, his prey’s chairman.
Dickey could point to last week’s stronger-than-expected “Withhold” vote against Ferro’s chosen and friendly board. As final vote totals came in, Tribune could only note that “the board was re-elected”, while acknowledging that 40% or more of the votes had gone against the slate, a strong number.
Gannett could trumpet that about half or more of the unaffiliated (largely non-Ferro-held shares) had voted against the seating of the board. All that math provided Dickey cover to proceed, even as Ferro has provided the new shock of renaming the hallowed Tribune Publishing company “tronc,” and now proclaims his intent to produce 2000 videos a day using the artificial intelligence technology – so far un-built – that he’s made the cornerstone of his anti-Gannett strategy.
Another Gannett alternative has been to raise its price. While sources have long indicated that Gannett would make a third offer – after upping its per share price to $15 in its second offer – the company decided there’s little percentage in doing that now. Given Michael Ferro’s intransigence, Gannett would have just raised its floor, without any reasonable hope of success.
There’s one more reason why Gannett has put in the brakes on this high-speed newspaper chase. In the Delaware courts, a suit against Tribune now proceeds. Shareholder Capital Structures Realty Advisors leveled its charges that Tribune management wasn’t serving its legal obligations toward shareholders.
The case will likely be heard in the same time frame that Gannett has outlined – and before the release of August’s Tronc financials.
One corporate governance expert on Delaware law, who wishes to remain anonymous, told me Monday that it would take “about 90 days for a preliminary injunction. There is no jury and the injunction’s supporting and opposing facts are done on affidavits, not testimony.”
And what would the remedy be, if plaintiffs win the case?
“There are rarely damages at that stage, but attorneys’ fees can be awarded. The remedy is either to halt an action or compel action by the fiduciaries.”
In this case, compulsion is the goal: having the Delaware Chancery Court compel Tronc’s board of directors to negotiate in good faith any bona fide offer, which by any financial reckoning, Gannett’s would be.
Put it all together and by the end of summer, Gannett figures that it may get help in court and from the very financial vicissitudes that affect its own performance – print ad revenue that’s going down more precipitously for newspaper companies this year than it even did last year.
By then, as well, it’s only a half-year until nominees can be put forward for the next board election of Tribune-turned-tronc. Gannett missed that deadline to offer an alternative slate this year, but it’s betting with its big “Withhold” vote that next year would likely provide a better result. Elect a new, open-to-sale board, and then, one year after this saga began, Gannett might finally win its target.
In the meanwhile, the consternation within Michael Ferro’s eccentrically named company grows daily. While neither Ferro nor his new top echelon, none of whom have much media business experience, talk in any detail about the company’s next-generation actual plans, those on the inside of the newspapers are wary.
As I’ve noted (“Newsonomics: “Readers’ Guide Tribune gets Troncked: A Reader’s Guide to the Tribune/Gannett War”, while the Tronc logo is done, very little work has been done on the promised “content monetization engine” itself. Any idea, no matter if good, will take months to build and longer to monetize. Producing 2000 videos a day – as out-of-the-box as that may seem — would be only a start of making money. It’s getting sizable number of people to watch them that does that trick.
That’s what the media business is all about, and why it distinguishes itself from the tech business, and one that Mr. Ferro doesn’t seem to grok.
Then, finally, there’s the less magical realism of using Tribune/Tronc’s large audience in ways that may defy the traditional barrier between editorial and advertising content. Ferro has already talked about further raising the profile of auto and real estate advertising and commerce, in ways that readers may mistake for newsroom-produced content. That will be something to watch out for, as the new Tronc takes the old Tribune on its next wild ride.
