Gannett Co. Inc.’s (NYSE: GCI) share price has stayed relatively steady since a battle broke out between the two largest shareholders of Tronc Inc. (NASDAQ: TRNC), which Gannett tried to buy last year. Simultaneously, the trading level of Tronc’s shares has been very low, an indication investors have not moved into the stock in the anticipation of an offer well above the current trading price, which is just below $14.
Wall Street punished Gannett for its offer last year, primarily because many experts believed the price was too steep. The offer was apparently for more than $18, along with the assumption of Tronc’s debt. Gannett’s shares traded for nearly $18 last April. They dropped to $7.30 in November. While part of the drop may have been due to weak earnings, the main trigger was Gannett’s months-long pursuit of the smaller newspaper chain.
Presumably, investors would sell Gannett’s shares down at least modestly in the face of fear about a new offer for Tronc. And suspicions about a move would trigger a spike in Gannett’s volume. Instead, volume has been very modest. On Friday, only 837,000 Gannett shares changed hands. The average volume is 1.2 million shares a day. Incidentally, Tronc traded only 76,000 shares Friday, against its average of 114,000.
Gannett may have a reason to stay away from a Tronc bid that is beyond concern about its share price. The dispute that has broken out between Chairman Michael Ferro and departing Vice Chairman Patrick Soon-Shiong (who has a net worth of $8 billion, according to Forbes) involves several chess moves so far. Ferro forced Soon-Shiong off the board. Soon-Shiong’s Nant Capital increased its share of the company to 24.0%, just below Ferro’s 24.9%. Tronc then bought out large shareholder Oaktree Capital for a $15 a share (3.75 million shares in all), a substantial premium with a commitment to a higher price later if Tronc was sold for over the $15. Ferro then got the Tronc board to lift the maximum percentage of the company any single entity could own from 25% to 30%. Soon-Shiong questioned why Ferro should receive the privilege.
For any outsider to step into a melee, the outcome of which is very uncertain, carries risks beyond the future of Tronc’s earnings. Gannett’s share price is steady, a sign that its current plans, which have not publicly included Tronc for months, are unlikely to change, at least in the opinion of many outsiders.