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Gannett reports losses for Q4

Reduced revenues come as media company offers shareholders exit strategy

By David Wildstein, February 20 2019 4:37 pm

Gannett reported wider than expected losses for the fourth-quarter of 2018 at a time that they are fighting a takeover bid from another national media company with a history of slashing reporter jobs.

MNG Enterprises, known as Digital First Media, offered to purchase the struggling media giant that owns eight daily newspapers in New Jersey, but the Gannett board declined the $1.4 billion offer.  That has set a hostile takeover bid into motion.

“Gannett’s disappointing year-end earnings and guidance underscore MNG’s concerns about the health and direction of the business,” MNG said in a statement today.

MNG says that Gannett has lost two-thirds of its free cash flow over the last four years.  They said Gannett’s share price has declined 41% since a 2015 spinoff.

“Despite touting revenue gains in its digital assets, Gannett only partially disclosed the profitability of those assets and reaffirmed its interest in making additional digital acquisitions,” MNG said.  “It’s hard to fathom how the Gannett Board can continue to reject a premium, cash acquisition proposal when further declines and value destruction are on the horizon.”

Robert Dickey, the Gannett CEO, pushed back on MNG’s claims.

“With valuations coming down, especially with digital pure plays, we are paying more attention to those opportunities,” Dickey said on a call with financial analysts reported by the Wall Street Journal. “We are also continuing to look at small and mid-sized market opportunities.”

Alden Global Capital, a Wall Street hedge-fund that owns a majority control of MNG, said they expect Gannett to play games with its explanation.

“Gannett now will likely seek to spin the Company’s quarterly results in the best possible light, despite the reality of Gannett’s continuing under-performance, and is unlikely to allow questions from MNG, its largest active shareholder,

The (Bergen) Record has laid off six employees this year while Dickey’s compensation by has gone up 17% over the last four years to $8.7 million annually.

According to MNG, Gannett has spent about $350 million on digital media acquisitions while EBITDA has declined by 31% and cash flow by nearly 50%.

“Why should shareholders view this strategy shift from print towards digital as anything but a substantial waste of shareholder capital, and why should shareholders have any reason to believe that the Board’s digital strategy will ever bear fruit?,” MNG questioned.

MNG/Digital First has launched a new website, SaveGannett.com, to provide information to shareholders seeking information on the proposed sale.

An independent analyst, J.P. Morgan, has called the MNG/Digital First offer “a potentially favorable exit for shareholders.”

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 are currently owned by Gannett.   Digital First Media owns more than 200 newspapers nationwide, including the Trentonian.

The Gannett newspapers in New Jersey have had a virtual blackout of news on the takeover bid, including no report of today’s news on their earnings and revenues.

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