MNG Enterprises Seeks to Elect Three Highly Qualified Director Nominees to Refresh the Gannett Board
Welcomes ISS Support for Its Nominee to Gannett Board of Directors
Urges Gannett Shareholders to Vote on the BLUE Proxy Card FOR All Three MNG Nominees to Bring Measured Change to Gannett’s Board and Send a Clear Message that the Board Needs to Act to Maximize Value Now
Gannett’s entrenched Board rejected a 41%
premium,1 cash acquisition proposal.
Now it’s time for shareholders to have their say.
On January 14, MNG made a proposal to acquire Gannett for $12.00 per share in cash, which represented a 41% premium to Gannett’s 2018 year-end share price. On February 4, Gannett rejected our all-cash proposal and refused to extend the deadline for director nominations without even first meeting with MNG and its advisors. While it remains our strong preference to engage cooperatively with Gannett’s board to work toward a mutually beneficial transaction, MNG’s only option to preserve its rights was to submit a slate of highly qualified director nominees to Gannett’s Board. MNG had originally nominated a slate of six nominees and has since modified its slate to three highly qualified nominees in response to fellow shareholders who support a full strategic alternatives process.
MNG’s nominees have the right mix of newspaper turnaround, real estate, and capital allocation expertise to improve the Gannett Board, and are committed to maximizing value for all Gannett shareholders. Notably, all three MNG nominees are independent from Gannett and its management, and two out of three nominees are independent from MNG.
On May 1, Gannett announced its Q1 2019 earnings, nothing that Organic Revenue fell 10% YOY, Free Cash Flow declined 52% YOY and Net Debt ballooned 33% YOY. These results underscore the stark choice between MNG’s nominees, who will serve as a catalyst for immediate value creation, and the entrenched incumbent directors, who endorse a failing, risky, multi-year digital transformation that we believe is extremely unlikely ever to produce a $12 per share valuation.
On May 2, ISS released a report recommending that Gannett shareholders vote on the BLUE proxy card and support the election of Steven Rossi to Gannett’s Board of Directors at the Company’s upcoming Annual Meeting, scheduled for Thursday, May 16, 2019. The Annual Meeting is an opportunity for shareholders to make their voices heard on the best path forward for Gannett. We urge you to vote For all three of our highly qualified nominees on the Blue proxy card to protect and maximize the value of your investment!
ISS analyzed detailed presentations and met with both sides to hear their positions and considered, among other things, Gannett’s significant underperformance experienced under its current Board, the Gannett Board’s failure to engage with MNG on its $12 per share, premium, all-cash offer, as well as the potential benefits of having an MNG nominee on the Gannett Board.
ISS noted the following in its report:2
- MNG’s premium, all-cash offer provides an attractive exit for shareholders of an underperforming company;
- Gannett’s digital transformation has yet to bear fruit and there is execution risk in a standalone plan;
- Gannett’s earnings were lackluster and there may be downside to its trading price;
- Gannett concedes that $12/share is adequate to start discussions; and
- The presence of an MNG nominee on the Gannett Board will help ensure that Gannett properly considers MNG’s offer.
The ISS report echoes what MNG has been saying all along – that Gannett has underperformed, that its digital strategy has yet to bear fruit and may never do so, and that Gannett needs a catalyst for change on its board and should properly consider MNG’s offer or other strategic alternatives. However, we believe it is imperative that Gannett shareholders vote for all three of MNG’s nominees to ensure the Gannett board act now to maximize value.
Under Gannett’s Board and management, the Company’s value destructive operating strategy and highly questionable capital allocation decisions have directly reduced net income by 93%. We believe Gannett has been moving in the wrong direction for quite some time and as shown below, Gannett’s stock has significantly underperformed peers and the market since spinoff. This has to stop!
“…we have low visibility on a better potential plan outside of the offer, particularly amid a CEO transition.”
– J.P. Morgan Research Report, May 1, 2019
“We note management’s continued strategy to shift the business to a higher-growth digital advertising model, but the transition remains a work in progress and results thus far have been uninspiring."
– J.P. Morgan Research Report, February 20, 2019
“Gannett has attempted to diversify from the challenging print business and into digital advertising in recent years, but results have been lackluster. We view MNG Enterprises interest as a potentially favorable exit strategy given the uncertainty in the long-term outlook for the print advertising, with softness in revenue and adj. EBITDA likely to continue for GCI."
– J.P.Morgan Research Report, January 14, 2019
1 Based on Gannett’s December 31, 2018 closing share price.
2 Permission to quote from report was neither sought nor obtained.