For the moment at least, newspaper publisher Gannett won’t be acquired by Digital First Media (the hedge fund-owned company also known as MNG Enterprises). Digital First made a bid for Gannett early in January, offering $12 a share (a 23 percent premium over Gannett’s $9.24 stock price at the time; Gannett stock is currently at $10.81), and that worried many journalists, given that Digital First has been known for massive cuts at papers like The Denver Post and given that Gannett (which owns USA Today, The Detroit Free Press, The Cincinnati Enquirer and many more) is the largest U.S. newspaper publisher as measured by total daily circulation of all its titles.
Gannett conducted major layoffs of its own in mid-January (alongside plenty of other media companies), but their 10-member board announced Monday that they’d unanimously rejected the Digital First offer. Here’s more on that from CNN’s Tom Kludt:
“After careful review and consideration, conducted in consultation with its financial and legal advisors, the Gannett board concluded that MNG’s unsolicited proposal undervalues Gannett and is not in the best interests of Gannett and its shareholders,” Gannett said in a statement. “In addition, Gannett does not believe MNG’s proposal is credible.”
MNG (itself mostly owned by New York hedge fund Alden Capital) currently owns around 7.5 percent of Gannett stock, so they wouldn’t be able to force a change here without other investors getting on board. Their own statement made it seem like they may not have given up, though:
“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% of the Company’s value. Gannett’s long-suffering shareholders cannot afford to wait any longer,” MNG said in a statement. “The only responsible course is for Gannett to engage in a genuine pursuit to maximize value, either from MNG or others with reported interest.”
MNG criticized Gannett’s strategic vision, saying the company “has no credible plan to attain a $12 per share valuation on its own” and criticizing Gannett’s “‘pie in the sky’ hopes for its digital businesses.”
And this story maybe isn’t over yet. Kludt notes that Gannett board chair J. Jeffry Louis requested a meeting with MNG board chair Joseph Fuchs in a letter Monday. That isn’t necessarily going to lead to a different offer, especially with the sides seemingly so far apart, but it’s interesting that Gannett still wants to talk about this. And it’s notable that MNG’s push isn’t just for them to acquire control of Gannett, but for the company to “engage in a genuine pursuit to maximize value, either from MNG or others with reported interest.”
However, any “pursuit to maximize value” is likely going to involve major cuts, if the past history of hedge fund ownership of papers is any indication. While that can briefly improve the bottom line, it’s far from clear that that maximizes long-term value, especially once subscribers and advertisers start leaving a skeletal paper, and once journalists start choosing not to work there. Of course, Gannett’s current ownership has made plenty of big cuts too, but it seems likely that hedge fund ownership might lead to even larger reductions at their papers. And given the scale of Gannett, this is definitely worth keeping an eye on. This particular bid may have been rebuffed, but that doesn’t mean that’s the end of the story.