Tronc Might Buy Us Weekly — The Street

By Douglas A. McIntyre Updated Jan 12, 2:10PM EST · Published Mar 7, 5:07PM EST

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Tronc Might Buy Us Weekly — The Street — © Thinkstock

[cnxvideo id=”655353″ placement=”ros”]The Street is reporting that Tronc Inc. (NASDAQ: TRNC), the former Tribune Company, may buy celebrity magazine Us Weekly from Wenner Media, the flagship of which is Rolling Stone. The move would take the newspaper chain from being the owner of local dailies to one with additional ambitions in national media. The transaction price may reach $95 million.

Us Weekly is in a highly competitive part of the media market. Its primary print competitor is People, owned by Time Inc. (NYSE: TIME). Some of its more formidable rivals operate only online. These include the Yahoo! Inc. (NASDAQ: YHOO) entertainment channel and TMZ. Despite this competition, The Street reports that Us Weekly profits could be as high as $20 million

Tronc’s chairman and largest shareholder, Michael Ferro, promised that his company would create s business model that sets it entirely apart from other largest chains including Gannett Co. Inc. (NYSE: GCI) and McClatchy Co. (NYSE: MNI). Gannett tried to buy Tronc last year. As part of the rebuilding of Tronc, its operations have been divided in two. The more traditional publishing operations operate under the troncM division. Most online business is consolidated under troncX In the quarter that ended on December 27, troncM revenue was $367 million. troncX revenue was $60 million. troncM operating income for the same period was $56 million. For troncX the comparable figure was $9 million. The addition of Us Weekly should boost the size of troncX considerably.

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Us Weekly could serve two purposes for Tronc. The first is as a successful standalone national publication with a substantial online footprint. The other is as the source of content for Tronc local papers, the largest of which are the Los Angeles Times and Chicago Tribune. The weakness of the second model is that other daily newspapers have instant access to other celebrity and gossip material. As a matter of fact, much of what runs in the LA Times “Ministry of Gossip” section is based on outside sources. Ferro may buy something he already has, in part.

Ferro has built enough of a cash war chest so that Tronc can easily pay the $95 million for Us Weekly. Tronc had $195 million in cash on its balance sheet at the end of last quarter.

Ferro and Tronc vice chairman Patrick Soon-Shiong own about 41% of Tronc’s shares, which means they have made it nearly impossible to buy the company on a hostile basis. Despite their power to control the company’s fate, investors should be happy. It has been a choppy time for newspaper stocks. So far this year, Gannett shares have fallen 17% and McClatchy’s are off 23%. Tronc stock, however, is down only 1% so far in 2017.

A buyout of Us Weekly would be a modestly priced experiment, but, for that matter, Tronc in an experiment, too.

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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.