Gannett Stock Offer Rejected by Foundation

The Gannett Foundation said Monday that it had rejected a bid from Gannett Co. to buy its 10% share in the company for $540 million and that it was formally authorizing its investment bankers to explore other offers.

The rejection is the latest turn in the strange feud between querulous former Gannett Chairman Allen H. Neuharth, who controls the foundation, and his old company. That dispute became public in April, when the foundation announced that it planned to sell its stake in Gannett, contending that the company’s dividend was not high enough to finance the foundation’s activities. Gannett is suffering from a recession in the newspaper business.

Wall Street analysts viewed the decision to sell the stock in the first place as an unusual public statement of disapproval by Neuharth of the way his handpicked successors have run Gannett.

In Monday’s statement, Martin F. Birmingham, chairman of the foundation’s finance and investment committee, called Gannett’s bid to pay the current market price of $33.875 a share “unsatisfactory” and said it would be “irresponsible” to accept it.

“The current depressed market price of Gannett stock does not represent the true value of the company,” Birmingham said. He noted that the $540-million offer contrasts with a market value for the foundation’s stake of $800 million a year ago.

The company has been offering the market price since it expressed an interest in buying the stake in May, when the stock was trading for more than $42 a share, or closer to $700 million.

The foundation also said Neuharth had advised earlier that “no substantive talks with interested third parties would take place as long as serious negotiations were going on with Gannett.” But earlier this year the foundation publicly acknowledged it had received “numerous expressions of interest” from potential buyers and had hired the investment firm Salomon Bros. to handle the transaction.