Gannett Co.’s board of directors said Monday that it had rejected a $1.36-billion buyout bid from fellow newspaper owner Digital First Media, questioning the would-be buyer’s motives and accusing it of trying to conceal its “inability to finance and complete” the deal.
“After careful review and consideration, conducted in consultation with its financial and legal advisers, the Gannett board concluded that MNG’s unsolicited proposal undervalues Gannett and is not in the best interests of Gannett and its shareholders,” the company — whose newspapers include USA Today, the Ventura County Star and Palm Springs’ Desert Sun — said in a news release. “In addition, Gannett does not believe MNG’s proposal is credible.”
Digital First — which is being rebranded as MNG Enterprises and whose newspapers include the Orange County Register, Los Angeles Daily News and Denver Post — quickly fired back. It said it had hired a Wall Street investment bank, Moelis & Co., to help finance the deal and was considering nominating new Gannett board members this week.
“MNG will consider its options in the coming days, including nominating a slate of individuals to the Gannett board who agree that Gannett shareholders should decide for themselves whether to accept our premium cash offer or other alternatives for immediate and certain value,” Digital First said in a statement.
MNG owns about 200 publications. Backed by hedge fund Alden Global Capital, it told Gannett last month that Gannett’s executives had made a series of “value-destroying” decisions. MNG urged the board to sell the company, including USA Today and more than 100 outlets, for $12 a share, about 41% more than what the stock was trading for at the time.
Gannett shares slipped 2.2% to $10.97 on Monday.
Gannett’s board contends it was prepared to discuss the buyout proposal until MNG insisted on Gannett officials signing non-disclosure agreements and refused to explain in writing how it would finance the purchase or address potential antitrust concerns.
“In light of this, Gannett now questions MNG’s motives and can only conclude that the proposed [non-disclosure agreement] is a distraction designed to mask MNG’s inability to finance and complete the proposed transaction,” Gannett’s board wrote.
At the heart of the takeover bid are competing views of how best to monetize the newspaper industry, which is struggling with declining circulation and other changes. Despite making a series of layoffs — including some last week — Gannett has moved to build on its newspaper brands by growing digital readership, serving both shareholders and the public in the process.
“We believe that our future — and that of the industry — turns on thoughtful investments in journalism and marketing solutions, so we can deliver engagement when, where and how our audiences and customers demand it,” J. Jeffry Louis, Gannett board chairman, said in his company’s statement.
But MNG is Gannett’s largest active shareholder, with a 7.5% stake. Its executives argue that Gannett’s digital investments have not paid off and that the company should stop making any new digital investments and not fill key leadership posts, including the chief executive job, until it pursues a new strategy.
When it has previously taken over newspapers, including the bankrupt Journal Register chain, MNG has dramatically cut staff and, in some cases, sold the newspapers’ offices. That has prompted outcries from critics who say the company lays off journalists without regard for newspapers’ roles in their communities.
Meanwhile, digital-only news outlets, including Buzzfeed and Vice, have recently made cuts too.
On Monday, MNG criticized Gannett’s “pie in the sky” turnaround plans, saying Gannett “cannot be counted on to deliver value superior to the immediate and substantial premium being offered by MNG.”