WASHINGTON, April 25, 2016 – Our newspaper-loving neighbors over in Baltimore got a rude awakening this morning when they learned that Tyson’s Corner, Virginia-based Gannett (symbol: GCI) has just offered to buy the struggling Tribune Publishing (TPUB) chain for $815 million, a price that includes the assumption of debt. Among its newspaper properties, Tribune Publishing owns the Baltimore Sun.
Not surprisingly, TPUB shares were up sharply at Monday’s opening bell. As of 10 a.m. EDT, the company’s stock is trading at $11.75 per share, a 56.25 percent gain of $4.23 per share over Friday’s close. That’s less than Gannett’s offer of $12.25 per share, a typical response when initial takeover news is announced. That’s because many investors want to wait to see if a competitor wants to top Gannett’s bid. So far, no one else has stepped up with another bid or a threat of one.
The Tribune conglomerate, which included media properties such as Chicago-based WGN America, has been troubled for years, weighed down heavily by its money-losing newspaper properties, which, in addition to the Sun, also include the Los Angeles Times, the Hartford (Connecticut) Courant and the company’s flagship Chicago Tribune.
In an earlier attempt to rationalize the company, the conglomerate spun off its newspaper properties into Tribune Publishing, retaining its media holdings in Tribune Media Company (TRCO). TRCO’s stock is slightly down today.
In a likely related move, TPUB also announced that the L.A. Times’ publisher and chief executive Austin Beutner has been sacked. Beutner had held that position for only a little over a year, yet another indication of the continuing chaos at that paper as circulation has continued to tank in recent years.
In a letter, later made public, to TPUB’s CEO, Justin Dearborn, Gannet’s CEO, Robert Dickey states that its proposed deal “would create a company with the financial stability and flexibility equipped to preserve journalistic integrity, high standards and excellence for years to come. We would be able to both empower our journalists and facilitate the creation of exceptional content while delivering stockholder value.”
What Dickey didn’t mention is that “financial stability and flexibility” is code signaling a likelihood that considerably fewer journalists will be “empowered” to create “exceptional content.”
That’s been the pattern in the newspaper business for years as its late and generally inadequate response to both 24/7 cable news channels and vast quantities of free, online news content have virtually eviscerated its subscriber and newsstand base over the years.
The Wall Street Journal, on the other hand, got it right almost from the start, having gone online with a subscriber-based Internet version of that publication, while broadening its content to appeal to a wealthy lifestyle readership in addition to its traditionally strong business news reporting. The paper is currently owned by Rupert Murdoch’s News Corp. (NWS).
In other news, while Saudi Arabia’s overproduction attack on U.S. frackers has been successful in the short term as a means of protecting the kingdom’s market share, the tactic has seriously damaged OPEC, specifically its weaker partners like unstable Nigeria and tottering, Communist-led Venezuela.
The Saudis’ game of oil-chicken hasn’t helped maintain the country’s hitherto massive cash till either, the account that provides the giveaways and subsidies the royal family needs to deploy to keep its lower-class populace happy with free and subsidized stuff.
That’s why it’s not surprising to the Maven that the Saudis have announced they’re planning to IPO a “stake” in the kingdom’s huge, government-owned Arabian American Oil Company, better known as Aramco. That “stake” will be only 5 percent, at least for starters. (You didn’t think the royal family would give up anything near majority control of that black gold mine, did you?)
Aramco will be changed into a holding company format as well, perhaps allowing other company subsidiaries to be sold, spun off or initial public offerings in their own right, according to reports from Reuters and other sources including Al Arabiya News.
Even more significant, and indicative of some forward thinking, the Saudis have also announced they’ll be launching a new “Saudi Vision 2030” program. Its aim: to steadily diversify away from an economy that is nearly 100 percent reliant on oil exports. That makes sense. At the rate the Saudis have been pumping, they’ll begin to run dry sooner rather than later.
After a death in the family, Apple to report this week
In other news, more earnings reports are on tap for this week, some of which may move markets significantly one way or the other. Apple (AAPL) is on deck to report this week after having delayed its report—scheduled for last week—due to the death of and funeral arrangements for former Intuit (INTU) CEO, Apple board member and, earlier, Apple’s marketing guru Bill Campbell.
Although hired original by John Scully—the man who fired Steve Jobs—Campbell developed a close working relationship with Apple’s godfather when he returned to the company as a board member. He was instrumental in helping Jobs engineer Apple’s spectacular, back-from-the-dead relaunch. Although he resigned from the company’s board in 2014, his presence was sorely missed.
Fed back on the radar. Negative interest rates under consideration?
Elsewhere, the Fed’s Open Market Committee (FOMC) holds its closely-watched two-day meeting this Tuesday and Wednesday, and traders will be watching for clues on those elusive interest rate hikes. The Fed has been outdoing Hamlet lately on its indecisiveness, and interest in the central bank’s sense of direction was heightened over the weekend when news leaked out of a semi-secret meeting between current Fed Chair Janet Yellen and President Obama.
What were Yellen and Obama talking about? They won’t say. But rumors are already flying fast and thick that the main topic was the possibility of negative interest rates. “To be, or not to be…” Stay tuned.
Perhaps because of these rumors but more likely because markets are hugely overbought on a short- and intermediate-term basis, all three widely followed market averages are pinned in the red in Monday trading, with the Dow Jones Industrials (DJI) off an unpleasant 134 points (down 0.75 percent) at 11 a.m. EDT. The S&P 500 and the NASDAQ are each off in the neighborhood of half a percent.
Today’s trading tips
Minimal. Considering Apple, the Fed, and the market’s overbought condition, not to mention the appearance of early “sell in May” sellers, putting on new positions will be treacherous this week, unless, of course, the Fed announces it’s making helicopter drops of free money to consumers for a change.
We continue to hold all our preferred stock positions as well as our now-significant position in Allergan term preferred (AGN/PRA), which is getting smacked up a bit today. We also continue to hold Teekay Tankers (TNK), which is anemic this morning (off two cents), but which remains a modest win for us thus far.