Whatever GannettCo Inc. is buying, TribunePublishing Co. is not selling.
In response to Gannett's recent unsolicited offer, Tribune on May 4 sent a letter to GannettChairman John Jeffry Louis III and company CEO Robert Dickey rejecting the $12.25-per-shareoffer as too low.
"Tribune Publishing is in the early stages of a compellingtransformation, with a well-defined strategic plan to drive increasing monetizationof our important brands, capitalize on the global potential of the LA Times and significantly accelerate ourconversion of content to revenue through an enhanced digital strategy," TribunePublishing CEO Justin Dearborn said in a news release accompanying the letter.
Dearborn added that while the Tribune board was always open toevaluating any credible proposal it believes is in the best interests of the companyand its shareholders, "Gannett's opportunistic proposal understates the company'strue value and is not a basis for further discussion." The company, he said,remains confident that its stand-alone strategic plan will generate greater shareholdervalue than is implied with Gannett's offer.
In its April 25 offer, Gannett argued that its all-cash proposalwould provide Tribune stockholders a 63% premium to the closing stock price of Tribuneon April 22 and a 58% premium to the volume weighted average trading price overthe past 90 days. Moreover, Gannett noted the $12.25-per-share offer price representeda significant premium to the $8.50 share price at which Tribune recently issuedcommon shares.
In its letter, though, Tribune explained why it viewed the offeras too low. Specifically, the company noted that the offer implies an EBITDA multipleof 4.6x based on the company's expected 2016 EBITDA of $169 million. By comparison,when Jeff Bezos boughtThe Washington Post, that deal carriedan EBITDA multiple of 11.4x, according to Tribune.
Given that Dearborn had previously called Gannett's offer "," Tribune'sletter of rejection is not necessarily surprising.