Hedge Fund-Backed Digital First Makes Offer For Gannett

Hedge-fund backed MNG Enterprises Inc., known for buying newspapers and slashing costs, is trying to acquire publisher Gannett Co. Inc (NYSE: GCI), arguing that the chain’s leadership team has overseen a large loss in value.

The offer, made Monday by MNG — better known by the name of its newspaper holding company Digital First Media — is for $12 per share for McLean, Va.-based Gannett. That's 23-percent more than Friday’s closing price of $9.75, and was causing Gannett’s stock to surge Monday by more than 20 percent.

Digital First is controlled by Alden Global Capital and is the publisher of the Denver Post and the San Jose Mercury News.

Gannett is the largest newspaper chain in the nation by circulation and the publisher of USA Today.

Negative Reaction From Media Insiders 

The hostile bid, first reported by The Wall Street Journal, quickly drew jeers from newspaper industry workers, particularly at Gannett-owned papers, who say the industry has already been deeply damaged by cost-cutting, with little left to eliminate. 

“Please don't sell to these hedge-fund vampires,” Brett Kelman, a reporter at Gannett’s Tennesseean newspaper in Nashville and for USA Today, wrote on Twitter.

Dear @Gannett: I’ve worked for you for 11 years. We do important journalism in many great communities that depend on us. Through thick and thin, I have loved this job. Please don’t sell to these hedge-fund vampires. https://t.co/Ib1sizPMZj

— Brett Kelman (@BrettKelman) January 14, 2019

“Digital First Media’s hedge fund owner slashes local newsrooms to the bone, soaks them for profits and then spends money on things that aren’t journalism,” Los Angeles Times national correspondent Matt Pearce added. “If they’re knocking on the door, you should lock the deadbolt.”

Noting the company has made deep cuts at papers it already owns, Wall Street Journal media and tech reporter Keach Hagey wrote on Twitter: “I'm fascinated to learn what fat Digital First thinks is left.”

After watching what Gannett has done to my hometown paper--cutting most of the staff, outsourcing printing so far away local sports scores can't appear the next day--I'm fascinated to learn what fat Digital First thinks is left. https://t.co/AYvE6uWGi2

— Keach Hagey (@keachhagey) January 14, 2019

NewsGuild Points To DFM's Track Record 

Digital First has a 7.5-percent position in Gannett stock already and has also been urging the company to put a moratorium on new digital investments.

The Journal reported Sunday on a letter from Digital First to Gannett’s board that complained the chain’s leadership hasn’t effectively run the company, citing a 41-percent loss in share value since it went public more than two years ago.

The news comes shortly after Alden Global Capital admitted in court filings that Digital First diverted hundreds of millions of dollars from the newspapers it already owns into other Alden-managed investments.

A blog post published by the NewsGuild union’s unit representing Digital First workers cited court documents from a lawsuit filed against MNG by another hedge fund, Solus Alternative Asset Management — a minority stakeholder in Digital First papers.

Gannett shares were trading higher by 19.87 percent at $11.68 at the time of publication Monday. 

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Photo by Patrickneil/Wikimedia.