Gannett, the nation’s largest newspaper chain and the publisher of USA Today, The Desert Sun and Ventura County Star, rejected a takeover bid by MNG Enterprises, the hedge fund-owned company also known as Digital First Media, on Monday.
Digital First Media publishes several Southern California newspapers including the Los Angeles Daily News and the Orange County Register.
The decision by Gannett’s board of directors was unanimous.
“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, which is mostly owned by the New York hedge fund Alden Global Capital, made its unsolicited offer to buy Gannett last month for $12 a share, arguing that the struggling newspaper chain was in need of new ownership. Gannett has seen its value plunge by 40% over the last two years, and the company went through another round of painful layoffs last month at newspapers across the country.
But on Monday, Gannett said its board remains “confident that Gannett has significant value creation potential.”
MNG has earned a reputation for imposing deep cuts at its newspapers — even in an era defined by painful newsroom layoffs — and Gannett journalists had been alarmed by the announcement of the takeover bid.
On Monday, employees at Gannett-owned newspapers celebrated the spurned takeover bid.
“I so rarely smile when it comes to media news these days, but this made me smile,” tweeted Allie Gross, a business reporter for the Detroit Free Press.
In an email to employees on Monday, Gannett’s president and CEO Bob Dickey echoed the board’s comments, and said that the announcement would not affect their day-to-day business.
“We firmly believe that given our operational experience, our focus on evolving our business model, and our unwavering commitment to remaining a trusted source of news, we are uniquely positioned to deliver compelling content and value to all our stakeholders,” said Dickey, who is retiring later this year. “This announcement has no impact on our operations. I am counting on all of you to remain focused on your day-to-day responsibilities so we can continue to serve our communities, and in doing so, drive long-term growth for our company.”
MNG responded forcefully to the rejection.
“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.”
In announcing its takeover bid last month, MNG called on Gannett to committ to a “moratorium on the acquisition of any additional digital assets.” The next day, the Wall Street Journal reported that Gannett, which owns about 100 newspapers nationwide, had been pursuing a purchase of Gizmodo Media Group, the owner of websites such as Deadspin and Jezebel.
Still, the latest developments do not mean that the two sides are finished negotiating. In a letter Monday to Joseph Fuchs, MNG’s chairman of the board of directors, Gannett board chairman J. Jeffry Louis requested a meeting “with no preconditions” on Thursday.