Tribune Move May Thwart Gannett Tender Offer

The publisher's board adopts a "poison pill" that could make it too expensive for Gannett to pursue a hostile bid.
Katie Kuehner-HebertMay 9, 2016

Tribune Publishing has struck back at Gannett Co.’s unsolicited takeover bid by adopting a “poison pill” that would make an acquisition more expensive.

The owner of the Los Angeles Times and Chicago Tribune said Monday its board had adopted a shareholder rights plan and reiterated its opposition to Gannett’s $815 million offer, which includes the assumption of $390 million in debt.

“Our board is unanimous that Gannett will not succeed with its current tactics and low ball price,” Tribune CEO Justin Dearborn said in a news release. “Tribune stakeholders deserve better and we are confident that the steps we are taking will create better opportunities for future value than engaging with Gannett under the current circumstances.”

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Under the plan, the Los Angeles Times said, if an investor buys more than 20% of Tribune’s shares, existing shareholders could buy preferred shares at a substantial discount, “thereby diluting the stake of any acquiring company and making a takeover more expensive.”

Corporate governance expert Charles Elson said the poison pill effectively prevents Gannett from going directly to Tribune  shareholders with a tender offer for their shares, forcing negotiations to run through the board.

“Poison pills ultimately … just encourage further negotiation and sometimes maybe a higher price,” he told the Times. “They generally do not stop the transaction itself.”

Gannett said the adoption of a poison pill was “another demonstration that Tribune’s board and management team are not listening to its stockholders.”

“It is unfortunate that instead of engaging with Gannett to negotiate a mutually agreeable transaction that is in the best interests of all Tribune stockholders, Tribune is putting up another roadblock to prevent its stockholders from realizing compelling, immediate, and certain cash value for their investment,” Gannett said in an emailed statement.

Oaktree Capital Group, Tribune’s second-largest shareholder at nearly 15%, has urged the company to negotiate with Gannett. Tribune stock closed slightly lower Monday at $11.50, below Gannett’s $12.25 offer.

“Tribune’s assets and brands … are worth far more than Gannett’s proposal, which is a nonstarter,” Tribune Chairman Michael Ferro said.

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