Gannett’s board of directors said Monday that it had rejected a $1.36 billion buyout bid from Digital First Media, questioning the would-be buyer’s motives and accusing it of trying to conceal the company’s “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 said in a statement. "In addition, Gannett does not believe MNG's proposal is credible."
Digital First, being re-branded as MNG Enterprises, quickly fired back, saying it had hired a Wall Street investment bank, Moelis & Co., to help finance the deal and was considering nominating new Gannett board members later 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 is Gannett's largest active shareholder, with a 7.5 percent stake. Its executives argue that Gannett's digital investments have not paid off and that the company should cease making any new digital investments and not fill key leadership posts, including the chief executive job, until it pursues a new strategy.
When MNG has previously taken over newspapers, including the bankrupt Journal Register chain, it has dramatically cut staff and sold the newspapers' buildings in some cases, prompting outcries from critics who say the company lays off journalists without regard for newspapers' roles in their communities.
MNG owns approximately 200 publications, including the Denver Post and San Jose Mercury News. Backed by hedge fund Alden Global Capital, the company told Gannett last month that Gannett's executives had made "value-destroying" decisions. MNG urged the board to sell the company, including USA Today and more than 100 outlets, for $12 per share, about 41 percent more than what the stock was trading for at the time.
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 anti-trust concerns by regulators.
"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 going forward as it struggles with declining circulation and other changes in the industry. 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," said J. Jeffry Louis, Gannett board chairman, in the company's statement.
Meanwhile, digital-only news outlets, including BuzzFeed and Vice, have made their own cuts recently.
MNG on Monday criticized Gannett's "pie in the sky" turnaround plans, saying the company "cannot be counted on to deliver value superior to the immediate and substantial premium being offered by MNG."
Gannett’s shares opened trading Monday at $10.98 and were trading at $10.90 at noon. The deadline for shareholders to nominate new Gannett board members is Thursday.