Gannett, which owns eight daily newspapers in New Jersey, has confirmed that they received an unsolicited cash offer to purchase the chain for $12 per share. Gannett’s stock closed last Friday at $9.75.
“Consistent with its fiduciary duties and in consultation with its financial and legal advisers, the Gannett board of directors will carefully review the proposal received to determine the course of action that it believes is in the best interest of the company and Gannett shareholders,” Gannett said in a statement released on Monday morning.” No action needs to be taken by Gannett shareholders at this point.
The prospective buyer is MNG Enterprises, which runs Digital First Media and is backed by New York-based hedge fund Alden Global Capital. They already have a 7.5% ownership stake in Gannett.
“Gannett has lost 41% of its value since its debut as a public company two and a half years ago, significantly under-performing its peer group and indices,” MNG chairman Joseph Fuchs wrote in a letter this morning to Gannett chairman John Jeffrey Louis III. “During this period, Gannett suffered from a series of value-destroying decisions made by an unfocused leadership team.”
“The company is at a critical juncture,” Fuchs said in his letter. “Its core newspaper business is in decline.”
Fuchs noted that Gannett’s CEO is departing in May and that key digital executives had announced their departure later this month. He says that Gannett “has not been successful as a public investment.”
“There’s now an even greater leadership void. Frankly, the team leading Gannett has not demonstrated that it’s capable of effectively running this enterprise as a public company,” Fuchs wrote. “Gannett shareholders cannot sit by and watch further value erode while the Board casts about for a strategy and a leader, especially when there is an opportunity to maximize value right now. We believe Gannett shareholders deserve better”
The offer represents a 41% premium to where Gannett stock closed at the end of 2018.
“MNG has invested in Gannett because we see significant value in Gannett’s assets, particularly its core newspaper business,” Fuchs wrote. “However, Gannett has been moving in the wrong direction, resulting in a declining stock price and lack of confidence that the Board and existing management are willing and able to take the steps necessary to turn the Company around”
“We believe that it will be very difficult for Gannett to address its operational and strategic issues as a public company, and that a sale of the Company presents the best path forward for Gannett stockholders, employees, business partners and customers,” said Fuchs.
The group already owns nearly five dozen daily newspapers across the country, including the Denver Post and the Boston Herald.
Digital Media First has a reputation for dramatic budget cuts, especially on the editorial side.
Cost-cutting at the Denver Post was so severe under DMG that the paper’s editorial page editor, Chuck Plunkett, wrote an editorial in his own paper calling on the owners to sell it; he resigned under pressure a month later.
Heath Freeman, 39, president of Alden Global Capital, grew up in Short Hills.
“His layoffs aren’t just painful. They are savage,” the Chicago Tribune wrote.
He was described in the Denver Post as “a man who has no real affinity for newspapers.”
The proposed sale was first reported on Sunday by the Wall Street Journal.
Gannett operates The (Bergen) Record, the Asbury Park Press, the Courier News, the Courier-Post, the Home News Tribune, the Daily Record, the Daily Journal, and the Herald News in New Jersey, as well as several weekly newspapers.