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Gannett takeover bid qualifies for financing, company says

Digital First Media can come up with $1.7 billion to buy newspaper chain

By David Wildstein, March 20 2019 3:58 pm

The media company that has launched a bid to purchase the Gannett newspaper chain appears to have secured the financing on a $1.7 billion bid.

MNG Enterprises, also known as Digital First Media, announced today that Oaktree Capital Management delivered a letter saying they are “highly confident” in the company’s ability to attain a debt financing package.

Gannett turned down a $12-per-share offer in January.  Digital Media First has now launched a hostile takeover bid.

“Oaktree is a knowledgeable investor with experience in the newspaper publishing industry, and we are pleased they have confidence in our ability to attain debt financing to acquire Gannett on these terms,” said MNG chairman R. Joseph Fuchs.  “MNG is a profitable newspaper operator with a strong, unlevered balance sheet. The combined company’s leverage profile would be conservative relative to industry comparables.”

In a statement released on Wednesday evening, Gannett said that the letter from Oaktree is highly conditional and does not represent a legal commitment to obtain the funding.

“The Gannett board of directors is confident that Gannett has significant value creation potential in continuing to execute the company’s strategy. Given Gannett’s operational expertise, our focus on executing our strategic digital transformation and our unwavering commitment to remaining a trusted source of news, Gannett is well positioned to grow the company and its valuable assets to the benefit of Gannett shareholders and the communities we serve,” the Gannett statement said.

Gannett owns eight daily newspapers in New Jersey: 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.

Since Gannett rejected the offer, the company has reported wider than expected losses for the fourth quarter of 2018.  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.

“It’s time for Gannett’s Board of Directors to stop blocking value creation opportunities for its shareholders and engage with MNG,” Fuchs said.  “We are prepared to move quickly and believe if granted the ability to conduct confirmatory due diligence, we can complete our work and finalize a financing package within weeks.”

Gannett says that their board “would engage with any party that makes a bona fide, credible proposal that appropriately values the company and is capable of being closed.”

“Gannett has said in the past that MNG’s proposal fails that test, and the letter from Oaktree Strategic Credit does not alter the company’s assessment of MNG’s proposal,” the company statement said.

The (Bergen) Record has laid off six employees this year while their CEO’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%.

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.”

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.

Editor’s Note: this story was updated at 7:44 PM with comment from Gannett.

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