Tribune-Gannett Takeover Battle: Why Wall Street Doesn’t Care Who Wins

“The newspaper model, in and of itself, doesn’t work,” Fox Biz’s Charlie Gasparino says

Tribune Publishing and Gannett Co. continue to battle publicly over Gannett’s attempt at a hostile takeover of its rival newspaper giant. Some commentators, including Fox Business Network senior correspondent Charlie Gasparino, have called a takeover inevitable though the impact would be slight given the dying nature of print media.

“The industry is done,” Gasparino told TheWrap. “We’re sticking a fork in it right now. It’s over.”

Gannett recently upped its unsolicited offer to purchase Tribune, which has assets that include the Los Angeles Times, Chicago Tribune and Baltimore Sun. It is now offering $864 million, or $15 per share, but Tribune chairman Michael Ferro reportedly countered by saying he’s flip it around and put in a bid for Gannett.

“The bigger company wins, right? That would probably be Gannett at this point. But Wall Street doesn’t care who takes over whom,” Gasparino said. “What they’re looking for in this sort of distressed industry is that they have to consolidate.”

Tribune’s portfolio includes 11 major daily newspapers in nine major markets with total Sunday circulation of approximately 2.4 million copies. Gannett owns USA Today and 92 local media organizations with a Sunday circulation of 3.9 million.

Gasparino feels it’s “sad” that “smart money” doesn’t appear to have any faith in the newspaper industry.

“There has been very little private equity interest in newspapers,” Gasparino said. “What private equity firms do is, they take it over, streamline the cost and then spin it out at a higher valuation at some other date as a public company. There has almost been none of that. So, some consolidation is necessary but it’s like newspapers’ last stand.”

Gasparino says the business model of newspapers “simply doesn’t work anymore” and the online model doesn’t even work the way it should. He pointed to Google’s aggregated model as something that could make Gannett thrive long-term.

“Even Amazon, to a certain extent, what they’re trying to do with the Washington Post, that seems to be maybe the model of the future,” Gasparino said. “The newspaper model, in and of itself, doesn’t work. It hasn’t worked for years.”

The finance world isn’t shocked by the increasingly public feud between Gannett and Tribune executives. “Nasty takeover battles occur all the time,” Gasparino said. “There is always resistance when company’s believe they have their own corporate culture and don’t want to give it up.”

Gasparino says if Tribune ignores Gannett’s offer, he doesn’t know if anyone else will be interested in a deal.

“The problem is, you have shareholders,” he said. “You can be held liable… they have a fiduciary responsibility to the shareholders. “

Investor Oaktree Capital Management, which owns roughly 15 percent of Tribune, sent a letter on Wednesday to the Tribune executives stating a strong desire to “engage Gannett immediately and seek to negotiate a transaction in the interest of all Tribune shareholders.”

And what about Ferro’s attempt to make a bid for Gannett? “It sounds unrealistic to me,” Gasparino said before explaining that crazier things have happened.