Gannett deal to buy Tronc is likely imminent Sources tell POLITICO the announcement could come as early as Monday morning

Gannett’s long quest to buy the newspaper company known as Tronc is nearing the finish line.

Confidential sources have told POLITICO that asset purchase agreement drafts have been exchanged by Gannett, the country’s second-largest newspaper chain and publisher of USA Today, and Tronc, formerly known as Tribune Publishing and the publisher of such broadsheet mainstays as The Los Angeles Times, The Chicago Tribune and The Baltimore Sun. The announcement of a deal could come as soon as business opens on the fourth quarter of the year, as early as Monday morning.

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Tronc’s board of directors held a meeting Thursday, sources said, that was likely focused on the sale. Attorneys, they said, were at work on documents at the end of last week.

Of course, given the many twists and turns in this process so far, further delays are certainly possible.

The likely price: $18.50 to $19, a slight rise from Gannett’s most recent offer of $18, one rejected by Tronc chairman Michael Ferro and his board August. Such a price would have represented a 140 percent premium over the then-trading price of Tribune Publishing shares before Gannett CEO Bob Dickey made his first offer for the company’s nine metro newspapers in the spring. Those papers, and their growing digital news operations, include some of the country’s largest and best known ones. The Los Angeles Times, still employing the U.S.’s third largest daily newsroom, and the Chicago Tribune have served as Tronc’s twin flagships, and would add great luster to Gannett. Gannett, already the largest newspaper company in the U.S., and second-largest worldwide (to News Corp.) would sew up two more top media markets – and largely complete CEO Dickey’s play to become the new scale play in local newspapering.

The Gannett–Tronc talks have seen six months of first public trash-talking, and then top-secret negotiations, as Michael Ferro early on steadfastly refused Gannett’s high-premium buyout offer. Within the last 10 days, press accounts of Gannett’s newfound interest in buying the Dallas Morning News, an unlikely seller, surfaced. Though the reports look a little thin, the “leak” may have added pressure on Ferro to complete a deal.

While the public had become well aware of Ferro’s aversion to selling, it hadn’t realized other complications of the deal. Financing looks like it is now in place for Gannett, with Jefferies LLC, a large American global investment bank, in place, financial sources said. As I reported earlier, Gannett had run into financing issues with large banks, including JP Morgan, growing wary of a deal. There were two main factors to their hesitation: First, the increasingly high price of the acquisition makes its financial justification tougher to certify, with Gannett’s leverage ratios apparently one question. Secondly, the further cratering of print advertising and sluggishness of digital advertising complicate further assessment of forward value.

Investors generally have shared the concern that Gannett could be overreaching in what would be its third significant acquisition since the newspaper operations split from old Gannett (newspapers and broadcast stations, now assembled as TEGNA) two years ago. As the stock market has hit new highs, Gannett has seen a drop of 40 percent in share price since it began its quest for Tribune/Tronc.

For its part, Gannett has remained bullish on the deal, believing it can wring large cost-saving synergies by combining many operations.

As Michael Ferro’s partners in Merrick Media, the investing vehicle with which Ferro bought control of Tribune Publishing in February, have increasingly lobbied him to sell to Gannett, one other investor, sources say, has remained insistently opposed.

Patrick Soon-Shiong, who invested $70.5 million, making him the second largest shareholder (edging out an investor who had been lobbying for the sale to Gannett) has objected to the sale. A longtime L.A. presence, Soon-Shiong’s interest in owning the L.A. Times began long before Ferro obtained his investment. He wants to see the Times locally owned as well, after 16 years of Chicago-based ownership. (Tribune Company bought Times-Mirror, including the Times, in 2000.)

Soon-Shiong has told associates that Ferro promised him that he wouldn’t sell Tronc to Gannett, when he committed to his own investment. He has threatened to sue, should a sale occur, said sources, though the basis of such a suit may be questionable.

Further, there may be one more complication as negotiations wend to a finish. Michael Ferro, who threatened to put together an offer to buy Gannett itself as the hostilities heightened in the spring, doesn’t want to leave the high-profile stage of newspaper ownership. Believing that his own ideas of Uberfied news can lead an industry turnaround, Ferro would like to become part of the new, expanded Gannett.

One possibility: a board seat for either Ferro, or someone else associated with Tronc. Another possibility: Ferro’s own, or Merrick Ventures’ investment in the company. Given that a lawsuit in the Delaware courts already accuses of Ferro of actions that benefited him more than the company’s shareholders, though, such a Gannett ascension might well be beyond what even the flamboyant Ferro can accomplish this time around.