Gannett's (GCI) announcement Tuesday that it was cancelling its six-month-long hostile effort to acquire the publisher of the Chicago Tribune and L.A. Times also puts a spotlight on a number of activist funds and arbitrageurs who accumulated large stakes and failed in their efforts to drive a combination of the two media giants.
The McLean, Va.-based owner of USA Today -- and the country's largest newspaper publisher -- issued a short statement saying it was terminating its discussions to acquire the Chicago Tribune and L.A. Times publisher, which changed its name from Tribune Publishing to Tronc (TRNC) in June. Although the statement didn't provide any additional details, reports suggest that banks set to finance Gannett's takeover of Tronc had backed out of the potential deal rather than fund a higher bid of $18.75 a share, up from $15 a share in May and $12.25 a share in April.
In addition, Tronc issued a statement noting that it had "serious doubts about Gannett's ability to finance a transaction" that was in the best interest of shareholders.
The announcement drove Tronc's shares down significantly in premarket trading to $9.92 a share, down 18% from its Monday close of $12.03 a share. The share price drop was likely a major disappointment for a number of activist funds and arbitrageur investors that had accumulated stakes as part of a push to drive a deal, with an unsuccessful result.
Case in point: Activist investor HG Vora Capital Management in August launched a campaign pushing for Tronc to consider "strategic alternatives" such as a sale. The fund reported accumulating a 14.9% stake in shares and derivatives.