Tronc's Latest Financials Likely to Pressure Chairman Michael Ferro to Sell

Fresh off the collapse of a potential sale to Gannett (GCI) , the newspaper publisher Tronc (TRNC) said its third-quarter revenue declined as advertising sales dropped amid an industry wide transition by marketers to digital platforms and away from print publications.

Tronc, known as Tribune Publishing until its name was changed in May, reported a net loss per share of 29 cents compared to a 33 cent per share loss for the same period a year ago. Advertising revenue tumbled 11% to $201.8 million while the publisher's adjusted net income tallied a mere $8 million.

Revenue of $378.2 million fell short of the $381.5 million average of two analysts as compiled by Bloomberg. 

Tronc's third-quarter results were issued hours after Gannett dropped its $683 million bid to acquire a media company that includes The Los Angeles Times, Chicago Tribune and other major U.S. daily newspapers. The collapse of the deal, combined with Tronc's modest earnings results, are likely to heighten pressure on Chairman Michael Ferro to sell the company.

Tronc CEO Justin Dearborn nonetheless used the company's earnings conference call to charge that Gannett "unilaterally" pulled out of a sale that he said the two companies were prepared to sign on Oct. 26. Dearborn said Gannett had a variety of financing alternatives and could have executed the deal.

"We were at the finish line on that as of last week," Dearborn said on an investor conference call. 

Dearborn also disputed a story in The Wall Street Journal story entitled Tronc Got Too Greedy, that argued that Tronc should have accepted Gannett's $15 offer back in May. "The idea that we became greedy is completely false," he said.

Gannett's decision to end its pursuit of a merger, sent Tronc's stock tumbling 12% on Tuesday to $10.54, well below the $18.75 per share offer the two companies had apparently agreed upon in mid-September. 

Tronc's third quarter results, though, weren't all negative, a reason that shares of the company were rising 4.2% in after-hours trading to $10.98. Tronc said its operating expenses declined by $40 million or 11% compared to the same quarter a year ago primarily to lower employee compensation expenses. Digital-only subscribers grew to 136,000, a 69% jump from a year ago and an 18% increase from the second quarter. 

The potential for the two sides to hammer out a deal, though, rests with Tribune's board, led by Ferro who doubles as the company's largest shareholder. In the coming weeks, Activist shareholders including Oaktree Capital and HG Vora Capital Management are likely to continue to pressure Tronc's directors to sell to Gannett, the country's largest newspaper operator and widely viewed as .

For Ferro, even a deal at Tronc's current share price would represent a gain on his Chicago-based private equity firm Merrick Ventures' investment in the company's stock. Tronc in February, in need of cash, sold 5.2 million shares of newly issued stock to Merrick at $8.50 a shore for a mere $44.4 million, taking a 16.5% stake in the storied publisher long known as Tribune Co.

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