MNG Urges Gannett Shareholders to Demand Answers

1. Since 2015, Gannett has spent ~$350mm on digital acquisitions (or 36% of Gannett’s entire market capitalization1) while EBITDA has declined by 24%2 and Free Cash Flow has declined by 52%2. 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”?3

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?  

1 As of December 31, 2018
2 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.
3 J.P. Morgan Research Report, January 14, 2019 (permission to quote this report was neither sought nor obtained.)