A New York hedge fund known for slashing newsroom staffs is backing a hostile takeover bid for Gannett, the publisher of USA Today and 100 other newspapers. The unsolicited offer, worth over $1.3 billion, would create the largest newspaper company in the United States.
In an open letter to the Gannett board, MNG Enterprises, which is owned by the hedge fund Alden Global Capital, offered on Monday to pay $12 cash per Gannett share, a 23 percent premium on the company's closing price on Friday. Gannett shares closed 21 percent higher in New York.
MNG said in its letter that Gannett had "suffered from a series of value-destroying decisions made by an unfocused leadership team." Gannett owns The Detroit Free Press, The Tennessean in Nashville, The Baxter Bulletin in Mountain Home and other newspapers in nearly three dozen states. Gannett also owned the Arkansas Gazette until 1991, when it closed the 172-year-old newspaper and sold the assets and name to what is now Arkansas Democrat-Gazette, Inc.
Operating under the name Digital First Media, MNG owns around 200 publications, including The Denver Post and The San Jose Mercury News in California. It said it was Gannett's largest shareholder, with a 7.5 percent stake.
Gannett, which is based in McLean, Va., said in a statement that its board would review the unsolicited proposal and that "no action needs to be taken" immediately.
Critics have described Alden as a "destroyer of newspapers" that is prone to "savage" layoffs, and as "one of the most ruthless of the corporate strip-miners seemingly intent on destroying local journalism."
Alden's bid 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. Publications in larger cities have not been immune. Extensive layoffs at The Daily News in New York imposed by Tribune Publishing, known at the time as Tronc, led readers to worry that important stories in New York, especially outside Manhattan, would go uncovered.
After it made deep cuts to The Denver Post newsroom, staff members openly revolted last year. The paper, which has won nine Pulitzer Prizes, published a series of articles critical of its owner. The lead editorial that accompanied the articles labeled Alden executives "vulture capitalists," and called for action.
Alden was started by Randall Smith and Heath Freeman. Smith made his name on Wall Street by specializing in investments involving distressed debt. Freeman, a former kicker for Duke University's football team, has helped lead the fund's strategy of buying newspapers and increasing profits by cutting costs drastically. The firm has not closed any newspapers.
When word of Alden's potential pursuit of Gannett began to spread after a report by The Wall Street Journal on Sunday night, journalists used Twitter to denounce the possibility.
"Digital First is the worst owner of newspapers in America and they will do their best to draw blood from even Gannett's already desiccated stone," wrote Joshua Benton, the director of Nieman Journalism Lab.
Alden declined to comment.
Gannett's revenue has been relatively flat from 2014 to the end of 2017, but its profit has shrunk in that time to $97 million from over $280 million. The company has also cut its workforce sharply, including letting go many newsroom employees. A company overview from the end of 2015 recorded 19,600 employees. By the end of 2017, the figure was 15,300.
MNG did not outline how it planned to manage Gannett.
In its letter, MNG was critical of Gannett's strategy of buying up digital businesses. It has spent over $300 million acquiring online advertising technologies and services, including ReachLocal and WordStream. MNG asked Gannett to immediately start reviewing strategic alternatives and to commit to a freeze on additional acquisitions of digital businesses, for which MNG said Gannett had overpaid in the past.
MNG added that Gannett should also develop a better strategy for the future before hiring a successor to Robert J. Dickey, the chief executive, who is set to leave in May.
MNG said it had approached Gannett several times before about a potential deal, but that it had been ignored. In its letter, MNG criticized Gannett's "leadership void" and its "ill-fated" attempt in 2016 to take over Tribune Publishing.
"Frankly the team leading Gannett has not demonstrated that it's capable of effectively running this enterprise as a public company," MNG wrote.
Business on 01/15/2019