A takeover bid by Digital First, whose official corporate name is MNG Enterprises, was rejected by Gannett last week a followup to an initial hostile offer last month. A proxy fight has ensued, with Digital First announcing during a February 7 meeting of the companies that it plans to nominate a slate of six members to Gannett’s board of directors.
In a pointed press release this morning, Gannett said the board nominations would not fly. The company cited the nominees’ conflicts of interest and also the age of one of them, 78-year-old MNG executive chairman R. Joseph Fuchs, who is older than Gannett’s mandatory retirement age for its board of directors.
Gannett — whose newspaper portfolio includes USA Today, the Detroit Free Press and the Des Moines Register — is facing stiff challenges as print circulation declines and digital revenue fails to make up the difference. Digital First, backed by private equity, has quickly acquired a reputation for bleeding the operations of established metro newspaper such as the Denver Post in order to extract maximum profits. The irony that Gannett would be the antelope and MNG the cheetah has not been lost on media observers who recall Gannett’s rise as a national force in newspapers, which came with heavy job losses and consolidation throughout the past two decades.
In its press release, Gannett said MNG was represented at the February 7 meeting by 15 people, “including financial and legal advisors who could have, but did not, address the issues” with the takeover proposal. The presentation of the offer, Gannett declared, “was deficient.” Its main flaws, according to Gannett, include the fact that the $1.8 billion takeover would be funded entirely with debt financing, which MNG has not yet secured.
“MNG offered vague assurances that it is not concerned about antitrust regulatory issues or pension liabilities in a potential transaction, but provided no specifics for these claims,” Gannett said, “and further stated that MNG would expect Gannett shareholders to share meaningfully in these risks, as opposed to signaling a willingness to bear these risks itself.”
Gannett board chairman J. Jeffry Louis described the company as “disappointed” that MNG “again failed to provide substantive answers to the basic questions Gannett has repeatedly raised. Instead, MNG offered vague and generic statements that further confirmed the board’s decision to reject MNG’s proposal.”
One consequence of the proxy fight could be alternative offers for Gannett as the newspaper sector continues to shrink. Tribune Publishing, according to the Wall Street Journal, is among the rival companies looking to put forward a bid for Gannett.