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Media

Gannett rejects hostile takeover bid from cost-cutting rival

By
Keith J. Kelly
Published Feb. 4, 2019
Updated Feb. 4, 2019, 4:27 p.m. ET

Newspaper giant Gannett said Monday its board has unanimously rejected a hostile takeover bid it got earlier this month from MNG Enterprises, a controversial cost-cutting rival, citing concerns that included the suitor’s lack of financing details.

MNG, more widely known as Digital First Media, has slashed staff at papers including the Denver Post, the Boston Herald and the San Jose Mercury News. It’s controlled by hedge fund Alden Global Capital, which already owns about 7.5 percent of the stock of Gannett, the publisher of USA Today and over 100 local papers.

The rejection of the MNG bid caused Gannett stock to tumble 2.3 percent to $10.96 a share on Monday. Alden has until Feb. 7 to decide if it wants to put forth its own slate to pressure the ten member Gannett board to make a deal.

Gannett Chairman John Jeffry Louis said in a statement that MNG’s ofer “undervalues Gannett and is not in the best interests of its shareholders,” adding that “Gannett does not believe MNG’s proposal is credible.”

MNG shot back that Gannett’s “pie in the sky hopes for its digital businesses are not believable and cannot be counted on to deliver value” that’s superior to the $12-a -share offer it unveiled for the USA Today publisher on Jan. 4.

“Gannett’s board today sent shareholders a clear message: that it intends to block immediate and certain value creation opportunities in favor of a speculative future that already has destroyed over 40 percent of the company’s value,” MNG said.

Vicious rounds of staff reductions have enabled Digital First to achieve a profit margin of about 16 percent. But the cuts have encountered stiff resistance and protests from news staffs. Gannett, the largest newspaper chain in the country by circulation with more than 100 dailies had its own round of cuts last month when an estimated 400 people were shown the door.

“Our board of directors is confident that Gannett has significant value creation potential,” said Gannett Chairman Louis.

Gannett is also looking outside the industry for a new CEO as current CEO Robert Dickey has already announced he is stepping down in May.

Consolidation is seen as one of the avenues for the hard-pressed newspaper industry to survive.

Tribune Publishing, owner of the Chicago Tribune, the struggling New York Daily News, the Baltimore Sun and the Florida Sun Sentinel, two years ago had rejected a hostile bid from Gannett. More recently, Tribune has been said to be mulling a merger approach to Gannett, but has yet to make an official offer.

At the same time, Tribune is in the crosshairs for a takeover by former hedge fund executive Will Wyatt and his Donerail Group, which is said to be planning a bust up of the chain soon after an acquisition.