Gannett, the publisher of USA Today and more than 100 other newspapers across nearly three dozen states, rejected a hostile takeover bid from a hedge fund-backed newspaper group on Monday, kicking off a battle for shareholder votes to determine the future of the company.
In a statement, Gannett’s board said it turned down a $1.3 billion buyout offer, or $12 per share, from MNG Enterprises, which is controlled by the New York hedge fund Alden Global Capital. It concluded that the “proposal undervalues Gannett and is not in the best interests of Gannett and its shareholders” and called it not “credible.”
The bid, made last month, comes amid a hollowing out of local newspapers across the country. Broader shifts in the media industry have devastated smaller publications over the past decade, with many closing and others reducing newsroom staffs and the number of times a week they are printed. Gannett recently held layoffs and has been steadily reducing its work force since 2015, when its television stations were cleaved off into a separate company.
If MNG were to purchase Gannett, it would create the largest newspaper publisher in the nation, adding Gannett’s lineup to a stable of 200 papers that include The Denver Post and The San Jose Mercury News. But media watchers have worried how such a merger could affect the already weakened local media landscape. Critics have derided Alden as a “destroyer of newspapers,” prone to “savage” layoffs and “one of the most ruthless of the corporate strip miners seemingly intent on destroying local journalism.”
MNG, which owns approximately 7 percent of Gannett’s stock, said the publisher’s rejection showed a disregard for its shareholders. “The sad reality for Gannett shareholders is the company has no credible plan to attain a $12 per share valuation on its own,” MNG said in a statement.
That kind of tit-for-tat sniping isn’t unusual in shareholder battles, and the fight for the future of Gannett could lead to a standoff over board nominees. MNG said it would now consider putting forth its own directors, who would vote for the offer if elected. Gannett typically holds elections in the spring.
Gannett, which also owns newspapers like The Detroit Free Press and The Tennessean in Nashville, has pushed a plan to transform its papers into digital outlets. It has spent over $300 million acquiring online advertising technologies and services, including ReachLocal and WordStream. MNG has been critical of that strategy and has asked Gannett to immediately review alternatives and to commit to a freeze on additional acquisitions of digital businesses.
The Alden-controlled publisher called Gannett’s digital strategy “pie in the sky,” adding that its “problems are better fixed by experienced operators such as MNG, away from pressures of the public markets.”
In a letter dated Jan. 16, the chairman of Gannett’s board, J. Jeffry Louis, asked MNG a series of questions, such as how it planned to finance its bid and how it planned to deal with potential antitrust scrutiny. Mr. Louis invited MNG’s leaders to discuss the issues, but then questioned the company’s motives when MNG required all parties to sign a nondisclosure agreement before any meeting.
The Alden-controlled company disputed that characterization, and said “there are no impediments — aside from the Gannett Board — to MNG completing the proposed transaction and for Gannett shareholders to achieve real value.”
MNG’s bid of $12 a share is a 23 percent premium to where Gannett had been trading before the offer. Following Gannett’s rejection Monday, shares in the company were down 3 percent to $10.88, after closing at $11.22 on Friday.