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Why Gannett Should Take Another Stab at Tronc (the publisher formerly known as Tribune)

Tronc Inc. (TRNC) , the newspaper publisher, is trading at a deep discount to its peers, revenue is mired in a persistent decline and company's stock has slumped even as New York Times (NYT) and News Corp. (NWSA) , owner of The Wall Street Journal, have surged.

Meanwhile, Michael Ferro, Tronc's chairman and its largest shareholder, has swung twice for acquisitions, missing on both the Chicago Sun-Times and US Weekly. Ferro, a brash hedge fund investor turned media owner, was eager to aggregate a larger metro audience by pairing his Chicago Tribune with the Sun-Times. But that didn't happen.

So what's next for Tronc, the company formerly known as Tribune Publishing that also owns the Los Angeles Times, the Baltimore Sun and the Orlando Sentinel?

Back in November, Gannett Co. Inc. (GCI) , publisher of USA Today and some 100 daily newspapers, ended a nearly six-month quest to acquire Tronc, offering as much as $18.75 per share. Since late-October when Gannett's banks pulled out of that proposed transaction, valued at about $673 million, Tronc shares have fallen 25%.

Despite months of Ferro exclaiming that Tronc wasn't for sale, a deal with Gannett appeared close to fruition. Both companies had seemingly found common ground on the strategy that a merged company would have more leverage with national advertisers seeking large digital audiences.

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