MNG urges Gannett shareholders to ask questions on earnings call
MNG Enterprises, which owns 7.5% of the outstanding shares of Gannett, is urging Gannett shareholders to read MNG's January 14 letter to Gannett and, on the Company's earnings call demand answers to the still unanswered questions about the Company's recent actions and path forward. MNG said, "On January 14, MNG proposed acquiring Gannett for $12 per share in cash, representing a 41% premium to Gannett's 2018 year-end share price, and asked the Gannett Board to do the following: enter into discussions with MNG about a strategic combination; hire an investment bank to conduct a review of strategic alternatives, including a potential sale of the Company; commit to a moratorium on digital acquisitions; and commit to a feasible, strategic and financial path forward before hiring a new CEO. Instead, on February 4, 2019, Gannett rejected MNG's premium all-cash proposal and refused to extend the deadline for director nominations without even first meeting with MNG and its advisors. Having done so, Gannett now will likely seek to spin the Company's quarterly results in the best possible light, despite the reality of Gannett's continuing underperformance, and is unlikely to allow questions from MNG, its largest active shareholder. MNG believes the owners of Gannett deserve better and calls on its fellow shareholders to demand answers to the following questions on the earnings call: 1. Since 2015, Gannett has spent ~$350mm on digital acquisitions while EBITDA has declined by 31%2 and Free Cash Flow has declined by close to 50%3. 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? 2. Why has the Board approved dramatic increases in CEO compensation at a CAGR of 17% from 2015 to 2017, despite a significant decline in share price during that period and consistent operational underperformance? 3. Given Gannett's continued underperformance, lower margins relative to peers and poor capital allocation, why should shareholders believe this Board will not keep destroying shareholder value? How does the Board respond to J.P. Morgan's characterization of MNG's proposal as a potentially favorable exit for shareholders "with softness in revenue and adj. EBITDA likely to continue for GCI"? 4. As of the end of 2018, Gannett's share price had declined 41% since its spin-off from TEGNA Inc. in 2015. What is Gannett's standalone plan to achieve more than a $12 per share valuation in the next year absent the MNG transaction, and why will the next year be different than previous years? How did Gannett determine that the $12 per share proposal undervalues the Company? 5. Given that the pro forma leverage ratio of a combined MNG-Gannett would be low relative to peers, why do you believe MNG's proposal would be difficult to finance? 6. Under what circumstances would the Gannett Board allow MNG to conduct customary due diligence and enter into discussions regarding a mutually beneficial transaction on potentially improved terms and/or initiate a strategic review process? 7. Why did you reject MNG's offer and deny their request to extend the director nomination deadline before even meeting with MNG, rather than engaging in good faith to satisfy your fiduciary duties to shareholders? "