Gannett and Tronc Shares Hold Their Own After M&A Talks

By Douglas A. McIntyre Updated Jan 12, 3:46PM EST · Published Jan 18, 11:25AM EST

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

Gannett and Tronc Shares Hold Their Own After M&A Talks — © Thinkstock

A possible merger between two of the largest newspaper companies in the United States, Tronc Inc. (NASDAQ: TRNC) (formerly Tribune Publishing) and Gannett Co. Inc. (NYSE: GCI), collapsed in early November. After the air had cleared, the shares of each were still at levels about where they traded two months ago. Investors likely are waiting for each to report its fourth-quarter numbers. And in each case the most anticipated numbers will be the digital revenue, which needs to keep a growth pace faster than the drop in paid print circulation and advertising. The race is now an old story for the industry, and among its most essential.

The fact that the market has held off in terms of driving share price movement obviously means that the post-M&A value of the two companies has been set based on their current businesses. In terms of Tronc, management has promised a digital revolution more extensive than those set out by most other companies in the sector. The company means to use a sort of artificial intelligence (AI) to create and curate stories, along with an explosion in the amount of video its properties serve, to drive what has been a drop of corporate revenue higher. In the most recently reported quarter, which ended on September, revenue was $378 million, down from $406 million in the same period the year before. Tronc posted a net loss of $10 million, compared to $9 million in the third quarter of 2015. The initial results of the AI and video initiative ought to show up in the management narrative for the fourth quarter.

Gannett’s results were not much different, albeit with some one-time events. Revenue rose to $772 million for the third quarter from $701 million in the same period a year ago. Gannett management said that much of this improvement was due to the purchase of the assets of North Jersey Media Group. The bottom line was more telling. Gannett lost $24 million for the period, compared to a profit of $39 million in the year-ago period. This year was affected $29 million of “facility consolidation and asset impairment charges.”

[nativounit]

Among the most critical challenges both Gannett and Tronc face is that they are unlikely to come close to matching the digital subscription revenue of New York Times Co. (NYSE: NYT), which presumably is based on the place of its flagship as America’s paper of record, if there is any such thing. The Times had nearly 1.6 digital only subscriptions at the end of the September period, and it reported after the presidential election that the figure had grown by 132,000 in less than a month. Given past results from the two companies and digital paid subscription trends across the industry, Tronc and Gannett will need to rely much more on digital advertising than on a New York Times model.

The stocks of Tronc and Gannett were thrown out of what would have been a normal trajectory by merger talks. Now they can move according to results.

[wallst_email_signup]

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.