Gannett rejects MNG’s takeover bid
Gannett Co. said Monday that its board has unanimously rejected an unsolicited proposal to be acquired by media company MNG Enterprises Inc., also known as Digital First Media, saying the proposal undervalues the company and the board doesn’t believe the offer is credible.
MNG on Jan. 14 offered to buy Gannett for $12 a share in cash, which at the time was a 23 percent premium above its most recent closing price of $9.75 a share. Gannett shares rose as high as $11.99 a share on Jan. 14, but closed Friday at $11.22.
“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 statement. “In addition, Gannett does not believe MNG’s proposal is credible.”
Gannett said that in response to the Jan. 14 offer, it sent a letter to MNG offering to arrange a meeting between representatives of both companies, including two of Gannett’s independent directors. In the letter, Gannett posed questions that included how MNG would finance the deal, what MNG’s view on antitrust concerns was, and what its approach would be to newsroom staffing and pension obligations. Gannett said MNG’s response was to require a non-disclosure agreement, or NDA.
“An NDA is not a prerequisite for
MNG to explain how it intends to finance and close the transaction MNG itself proposed,” Gannett said in its Monday press release announcing the rejection of the hostile bid. “Without such basic information, neither Gannett nor any other company in Gannett’s position would disclose sensitive, confidential information to MNG. While Gannett invited MNG to provide written responses at a level of detail that would not have required MNG to disclose confidential information, MNG still has not
provided any more information about how it would execute on its proposal.”
“In light of this, Gannett now questions MNG’s motives and can only conclude that the proposed NDA is a distraction designed to mask MNG’s inability to finance and complete the proposed transaction,” the company said. “Indeed, given MNG’s refusal to provide even the most basic answers to Gannett’s questions, it appears that MNG does not have a realistic plan to acquire Gannett.”
Gannett declined to comment beyond the news release.
In response to Gannett’s letter, MNG Enterprises said in a statement, “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 engineered by the team that already has destroyed over 40 percent of the company’s value.”
MNG Enterprises said it is better suited to oversee the media company. “Gannett is presiding over a declining core business, decreasing cash flow and significant leverage because it overpaid for digital assets,” MNG said. “Gannett’s deep structural problems are better fixed by experienced operators such as MNG, away from pressures of the public markets.”
Wall Street analysts had predicted that Gannett would decline the offer, saying that it was too low and that Digital First may have been betting on a level of cost cutting in Gannett that is unrealistic. At the time, Huber Research analysts Douglas Arthur and Craig Huber said any offer for Gannett should be at least $14 a share.
Digital First, majority owned by New York hedge fund Alden Global Capital, operates daily and weekly publications including the Denver Post and the Boston Herald. Gannett’s media properties include USA TODAY, The Arizona Republic and The Detroit Free Press. MNG holds a 7.5 percent ownership stake in Gannett.
The MNG offer has led to a flurry of speculation in the media and in journalism journals that the overture may set off a wave of consolidation in the industry, which has been dealing with a yearslong shift to digital advertising from print publications.
MNG said it has retained Moelis & Co. as its financial adviser and that it is prepared to talk to Gannett about how it plans to fund its proposal. MNG also said it would “consider its options in the coming days,” including the possibility of nominating candidates to Gannett’s board.
Some media reports have said there are doubts about Alden’s ability to finance a deal, and others have suggested Alden’s objective is to boost Gannett’s stock price or even to sell Digital First.
“If I were a Gannett board member, I would sort of scratch my head and say, ‘Well, what have you been doing up to now and where are you going to get the money?’ So from the Gannett board’s perspective, I see this as a logical response,” said Morton Pierce, a mergers and acquisitions lawyer with the law firm of White & Case in New York City.