Tribune adopts poison pill against Gannett takeover

May 09, 2016, 4:56 PM EDT
(Source: Daniel Oines/flickr)
(Source: Daniel Oines/flickr)

Tribune adopted a shareholders' rights plan -- or "poison pill" -- strategy against Gannett's hostile takeover bid.

Reuters reports:

The rights will become exercisable after a group buys more than 20 percent of Tribune Publishing's shares. If the rights plan is triggered, Tribune shareholders will get the number of shares having a market value of two times the exercise price of the right, the company said. Gannett, the owner of USA Today, made a takeover bid for Tribune last month at $12.25 per share in cash, valuing the publisher of the Chicago Tribune and the Los Angeles Times at about $815 million. Tribune rejected the offer last week. "Our board is unanimous that Gannett will not succeed with its current tactics and low ball price," Tribune Chief Executive Justin Dearborn said in a statement on Monday. Instead of negotiating a mutually agreeable deal, 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. The tussle comes at a time when the print industry is grappling with declining circulation, shrinking advertising revenue and a shift toward digital content. Gannett, which has expressed frustration over Tribune's reluctance to engage in talks for a deal, urged the company's shareholders last week to withhold their votes for board nominees during Tribune's annual meeting on June 2.

USA Today notes:

On April 25, Gannett, which owns USA TODAY and 107 local news properties, revealed its offer to pay $12.25 per share for Tribune Publishing. Gannett also offered to assume $390 million of Tribune’s debt, bringing the total value of the deal to $815 million. Tribune’s management — led by board chairman Michael Ferro, who’s also the largest shareholder — has resisted Gannett’s offer, saying it undervalues the company. Last week, Tribune's board unanimously voted to reject Gannett's offer of $12.25 per Tribune share. The price represents a 63% premium to Tribune’s closing stock price of the previous business day. Ferro bought his 16.6% stake in February for $44.4 million, or $8.50 a share.

The Chicago Tribune writes:

Corporate governance expert Charles Elson said Monday the poison pill approach effectively prevents Gannett from going directly to Tribune Publishing shareholders with a tender offer for their shares, forcing negotiations to run through the board. "Poison pills ultimately, they just encourage further negotiation and sometimes maybe a higher price," said Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. "They generally do not stop the transaction itself." If a deal is struck, the Tribune Publishing board can remove the poison pill at any time and allow the transaction to proceed, Elson said.