Fiction vs Fact

SINCE  RECEIVING OUR $12.00 PER SHARE 41% PREMIUM ALL-CASH OFFER, GANNETT HAS RELIED UPON MISLEADING AND FACTUALLY INCORRECT STATEMENTS IN AN EFFORT TO DISTRACT INVESTORS FROM THE TRUTH OF ITS DISMAL PERFORMANCE AND INABILITY TO GENERATE PROFITABLE GROWTH. THE INCUMBENT BOARD HAS BEEN UNWILLING TO ENGAGE WITH MNG’S GENUINE ATTEMPTS TO EXPLORE WAYS THAT WOULD ENHANCE VALUE FOR ALL GANNETT SHAREHOLDERS.

We are confident our nominees can initiate a review of strategic alternatives while putting Gannett back on a path towards profitable growth. In light of Gannett’s investor presentation and subsequent public releases, we are compelled to respond to correct their false and misleading statements. We think it is only fair to highlight their FICTION and note the FACTS so you can FAIRLY decide to vote “FOR” the MNG director nominees by internet, phone or on the BLUE proxy card sent by mail.

Fiction

Gannett says…

Gannett’s USA Today Network strategy, digital acquisitions and focus on client relationships is paying off

Fact

Gannett has been unable to generate profitable growth since its spin-off while MNG has an exceptional track record of growth across key metrics:

Fiction

Gannett has delivered a higher and more stable total shareholder return than most of its industry peers

Fact

Fiction

Gannett’s strategy is delivering results, with stable margins and positive cash flow generation

Fact

  • GCI’s Adj. EBITDA margins have declined by 300bps since
    spin-off1
  • GCI’s margins projected to decline again in 2019 by ~100bps4

Fiction

Gannett’s profitability is in line with public peers

Fact

  • Gannett’s adj. EBITDA margins trail peers by ~400bps5
  • Gannett’s adj. EBITDA margins trail MNG by ~520bps6
  • Gannett’s 2019E adj. EBITDA margins are 2nd worst and trail Gannett’s selected peer median7 by 300bps

Fiction

Gannett’s strategy is to pursue accretive growth through disciplined, selective acquisitions that provide synergies

Fact

  • $350mm spent on digital acquisitions (36% of market cap)8 and ~$650mm spent on acquisitions in total9 (67% of market cap)8

The result: diluted EPS down 93% since spin-off1

Fiction

Executive compensation is aligned with the execution of the company’s transformation strategy

Fact

  • Highest CEO compensation among peers at ~$21mm vs. peer median3,10 of ~$12mm over the past three years

Fiction

[Gannett has] strong leadership in place to oversee value creation

Fact

  • Incumbent board has overseen $780mm of value destruction11
  • Inadequate succession planning and CEO void expected beginning May 7th, 2019 ; Head of Digital resigned in Jan. 2019

Fiction

The combined [MNG-Gannett] would be levered at over 4x

Fact

  • MNG estimates pro forma leverage would be less than 3.0x12

Fiction

The proposal undervalues Gannett, its key assets and its prospects

Fact

  • 41% year-end premium, 23% unaffected premium and 30% premium to current share price13
  • Proposal implies a multiple of 5.5x TEV / 2019E EBITDA14 and represents a significant premium to Gannett’s median historical trading multiple of ~4.0x

Fiction

MNG presented no ability to finance transaction

Fact

  • Gannett is the barrier restricting MNG from finalizing our financing – it is rare for an acquirer to obtain fully committed financing without access to confidential information
  • MNG sent the Gannett board a highly confident letter from Oaktree given Oaktree’s size, experience investing in the newspaper industry, and prominence in the leverage finance market
  • Along with Oaktree, multiple other lenders that submitted term sheets expressed significant interest in participating in the financing
  • Gannett made no inquiry about the letter, Oaktree or any other potential financing sources; such lack of inquiry indicates the lack of seriousness by the Gannett board in evaluating MNG’s offer
  • MNG is confident it can finalize its financing package in a few weeks if given the opportunity to conduct due diligence under NDA

Fiction

MNG proposed no pathway for antitrust concerns

Fact

  • Antitrust not expected to be an impediment to close
  • In Gannett’s attempt to acquire Tribune Publishing, the same Board members at Gannett said it had a plan for antitrust clearance and that should be enough to start merger discussions15
  • MNG offered to share its work and strategy under NDA and Gannett refused to engage

Fiction

MNG has failed to address pension-related risks

Fact

  • Pensions not expected to be an impediment to close
  • Combined MNG-Gannett will be a much stronger and more profitable company and will strengthen the employee pension plan

-MNG believes the PBGC will view this as a positive

  • The PBGC early warning system does not interfere in M&A transactions that do not weaken the pension plan sponsor – this transaction will strengthen it!
  • MNG is current on all of its required contributions owed to its sponsored single-employer defined benefit pension plans
  • MNG believes the biggest risk to Gannett’s pension plan is a declining standalone Gannett

Fiction

MNG is looking to take control of the Board for its own benefit

Fact

  • MNG announced it reduced its slate to three to enable continuity for majority of the GCI Board
  • These “concerns” are entirely unfounded and the change to a minority slate makes them completely irrelevant

Fiction

…the number of MNG nominees does not matter…We believe that electing even one of MNG’s nominees to the Gannett board would put the value of your investment at risk

Fact

  • Our desire to nominate three highly qualified directors was based on direct feedback from other shareholders
  • Provides shareholders with the strongest platform to send a clear message that the Board must act now to commence a review of strategic alternatives to maximize value for all Gannett shareholders
  • As Gannett’s largest active shareholder, MNG is aligned in acting in the best interest of all shareholders
  • MNG’s nominees possess the newspaper turnaround, real estate, and capital allocation experience the Gannett board desperately needs and would enhance the value of your investment

Fiction

[MNG’s nominees] cannot be expected to act in the best interests of all Gannett shareholders

Fact

  • MNG’s nominees will act in the best interest of all shareholders including urging the company to engage in a full strategic review to maximize value for all Gannett shareholders

Fiction

…MNG has NOT demonstrated an ability to position acquired newspapers for long-term profitability

Fact

  • MNG has increased profitability evidenced by adj. EBITDA margins increasing from 11.6% to 16.2% from FY2015 to FY2018
  • During this time period it acquired and successfully integrated newspapers including the Orange County Register and Boston Herald, both of which are well positioned for long-term profitability

Fiction

MNG reduces jobs and ultimately closes papers all together

Fact

  • MNG saves newspapers and positions them for a strong and profitable future so they can weather the secular decline
  • In the aforementioned acquisitions, The Orange County Register and The Boston Herald, both papers were left for dead and put into bankruptcy by their former owners, which could have caused a liquidation and a loss of all the jobs
  • MNG stepped up and invested in them, saving many of those jobs and providing for new jobs

Footnotes

  1. Changes in Gannett financial results since its 2015 spin-off from its former parent company reflect changes in trailing 12-month financials from June 28, 2015 to December 31, 2018.
  2. Free Cash Flow per Share, calculated using fully diluted shares outstanding as of period end.
  3. Peers include Graham Holdings Company, Lee Enterprises, Incorporated, Meredith Corporation, The McClatchy Company, New Media Investment Group Inc., The New York Times Company, Scholastic Corporation, and Tribune Publishing Company; selected by MNG based on criteria including revenue, exposure to print publishing and footprint across multiple markets.
  4. Based on mid-point of GCI management 2019E guidance for Revenue of $2,740mm to $2,810mm and Adjusted EBITDA of $285mm to $295mm in 2018 Q4 Earnings Release.
  5. Based on Gannett’s 2018 adjusted EBITDA margin compared to peer median; peers include: Graham Holdings Company, Lee Enterprises, Incorporated, Meredith Corporation, The McClatchy Company, New Media Investment Group Inc., The New York Times Company, Scholastic Corporation, Tribune Publishing Company, and MediaNews Group; selected by MNG based on criteria including revenue, exposure to print publishing and footprint across multiple markets.
  6. Based on Gannett’s 2018 adjusted EBITDA margin compared to MNG’s FY2018 adjusted EBITDA margin for the fiscal year ended June 30, 2018.
  7. Gannett’s selected industry peers include The New York Times Company, New Media Investment Group Inc., Tribune Publishing Company, News Corporation, The McClatchy Company, and Lee Enterprises, Incorporated.
  8. Based on year-end market capitalization of $965 million per S&P Capital IQ.
  9. Digital acquisitions include ReachLocal, SweetIQ and WordStream and other acquisitions include Journal Media Group and North Jersey Media Group.
  10. Excludes New Media Investment Group Inc. due to CEO compensation not disclosed.
  11. Based on change in market capitalization from June 29, 2015 to January 11, 2019 per S&P Capital IQ.
  12. Including estimated year 1 run-rate synergies.
  13. Based on close price of $9.26 on April 25, 2019.
  14. Based on mid-point of GCI management 2019E guidance for Adj. EBITDA of $285mm to $295mm provided in 2018 Q4 Earnings Release; capitalization as of December 31, 2018.
  15. Source: Gannett Presentation, Gannett Urges Tribune Stockholders to Withhold Votes for ALL Tribune Directors at Upcoming Annual Meeting, filed with the SEC on May 13, 2016.