The bid by MNG Enterprises to take over USA Today publisher Gannett now has a showdown date, May 16, which the Gannett board set as the date of the annual shareholders meeting.
A proxy battle remains at full boil, with Gannett urging its shareholders once again to oppose the takeover bid, claiming it “undervalues” the nation’s largest newspaper chain and urging them to vote down the proposed slate of six members that MNG is trying to get elected to Gannett’s board.
The Gannett statement Tuesday said MNG is pursuing a “problematic two-pronged approach” by first launching a hostile takeover bid, then proposing its own slate of directors.
MNG, also known as Digital First Media, is owned by controversial cost-cutting hedge fund Alden Global Capital, which has offered $12 a share for Gannett, putting the deal at $1.7 billion.
The Gannett board claims it is in the midst of a “digital transformation” that will reap greater value long term. Gannett also claims that since all six of the MNG proposed board members are tied to Alden or MNG, they all have “inherent conflicts of interest.”
“Your board believes that MNG’s nominees would not bring any additive skills or experience to the Gannett board,” the company said. “Additionally, your board is cognizant of Alden’s history of engaging in transactions that have destroyed value while lining the pockets of Alden and its affiliates, including, at MNG, stripping newspapers of certain assets while paying Alden generous management fees.”
Alden’s investments in businesses such as Fred’s drugstore chain have floundered, but its deep cuts at its newspaper chain have coaxed a profit margin of 15 percent over the past year.
And MNG insists it could revive Gannett’s slumping fortunes.
“Gannett’s Board is running on its track record of value destruction and declining profitability, and on a risky ‘digital transformation’ plan that cannot compete with the immediate value that would be provided by MNG’s all-cash, premium proposal of $12 per share or any higher offer that may emerge,” said a statement from MNG. Alden owns 7.5 percent of Gannett’s stock and is its fifth-largest shareholder.
In trading Tuesday, Gannett closed at $10.45, up 1.5 percent.
Oaktree Capital, headed by billionaire Howard Marks, last week said it believes MNG has financing to do the deal — but only a summary of Oaktree’s letter was released via MNG. And the letter pointedly did not say whether Oaktree was willing to join or finance any portion of a deal. Oaktree declined to comment.
In the newspaper industry, Gannett has been known as an aggressive cutter of staff, as evidenced by its $35 million takeover in 2016 of the North Jersey Media Group that included two dailies, The Record in Bergen County, and the Herald News as well as dozens of small weekly papers. Over 500 people have been axed as the papers were downsized and many functions merged with other Gannett Jersey operations and with the Gannett-owned Journal News, which covers Westchester, Rockland and Putnam counties in New York.
Alden’s cuts at its papers have been even more severe. The News Guild of Denver picketed Alden’s offices in May to protest the unrelenting cuts that have reduced the staff from around 700 when Alden took over in 2010 to about 70 today. When MNG’s Digital First purchased the Boston Herald out of bankruptcy last May, it immediately slashed staff by nearly 60 percent, reducing its staff of 240 to about 100 today.