Cost-slasher Digital First makes run at Gannett

TNS

Jan. 15, 2019

Digital First Media, the hedge fund-controlled firm known for extreme cost-cutting in newsrooms from the Philadelphia suburbs to California, is making a $1.4-billion hostile bid for Gannett Co., the publisher of more than 100 daily newspapers, including USA Today and the Milwaukee Journal Sentinel.

In an open letter to the Gannett board, the firm proposed on Monday to acquire the company for $12 a share, or 41 percent of the company’s closing stock price on Dec. 31, and called for the company to halt investments into digital news properties. Gannett shares were trading at around $11.70, up nearly 20 percent, by mid-day Monday.

The firm making the offer is MNG Enterprises, better known as Digital First and part of New York hedge fund Alden Global Capital LLC. A deal, if it goes through, would make Digital First the largest publisher of newspapers in the country.

“Really their biggest claim is cutting costs,” Rick Edmonds, media business analyst for the non-profit Poynter Institute in Florida, said of Digital First. “This should be worrisome for Gannett employees.”

The Digital First bid surprised industry experts on Monday because the company has built its national chain of newspapers over the last decade by acquiring distressed or bankrupt papers and then cutting their staffs to the bone and selling off buildings.

Gannett had $711 million in revenues and $13.4 million in profits, along with cash of $108 million, for the quarter ended on Sept. 30. Based on last Friday’s closing price, stock market investors valued the company at $1.32 billion.

“Frankly, the team leading Gannett has not demonstrated that it’s capable of effectively running this enterprise as a public company,” MNG Enterprises said in a letter distributed publicly on Monday. “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.“ Gannett confirmed the offer on Monday morning, saying in a statement that it will review it. “No action needs to be taken by Gannett shareholders at this point,” it said.

“You can imagine what the mood is,” said one employee at the Courier-Post in Cherry Hill, N.J., a Gannett newspaper, on Monday. All calls were being referred to Gannett’s corporate headquarters in Virginia.

Gannett newspapers include the Detroit Free Press, the Arizona Republic and the Milwaukee Journal Sentinel. Other Digital First newspapers include the Denver Post and the Orange County Register in California.