A New York hedge fund known for gutting newsrooms is backing a hostile takeover bid for Gannett, the publisher of USA Today and 100 other newspapers. The unsolicited offer, worth over $1.3 billion, would create the largest newspaper company in the United States and further consolidate a struggling industry.
In an open letter to the Gannett board, MNG Enterprises, which is owned by the hedge fund Alden Global Capital, offered on Monday to pay $12 cash per Gannett share, a 23 percent premium on the company’s closing price on Friday. Gannett shares were trading about 19 percent higher around midday.
MNG said in its letter that Gannett, which owns the Detroit Free Press, the Tennessean in Nashville and other newspapers in nearly three dozen states, had “suffered from a series of value-destroying decisions made by an unfocused leadership team.”
Operating under the name Digital First Media, MNG owns around 200 publications, including the Denver Post and the San Jose Mercury News in California. It said it was Gannett’s largest shareholder, with a 7.5 percent stake.
Gannett, which is based in McLean, Virginia, said in a statement that its board would review the unsolicited proposal and that “no action needs to be taken” immediately.
Critics have described Alden as a “destroyer of newspapers” that is prone to “savage” layoffs and as “one of the most ruthless of the corporate strip-miners seemingly intent on destroying local journalism.”
Alden’s bid comes amid a hollowing out of local newspapers across the country. Broader shifts in the media industry have devastated smaller publications over the past decade, with many closing and others reducing newsroom staffs and the number of times a week they are printed. Publications in larger cities have not been immune. Extensive layoffs at the Daily News, imposed by Tribune Publishing, known at the time as Tronc, led readers to worry that important stories in New York, especially outside Manhattan, would go uncovered.
In markets like Boston, Los Angeles, Minneapolis and Washington, billionaires have taken control of the newspapers. And nonprofit organizations, as well as big technology companies like Google, have given money to try and help subsidize local reporting around the country.
Against this backdrop, the Alden name has assumed some notoriety in the newspaper industry. After it made deep cuts to the Denver Post newsroom, staff members openly revolted last year. The paper, which has won nine Pulitzer Prizes, published a series of articles critical of its owner. The lead editorial that accompanied the articles labeled Alden executives “vulture capitalists,” and called for action.
“Denver deserves a newspaper owner who supports its newsroom,” the editorial read. “If Alden isn’t willing to do good journalism here, it should sell The Post to owners who will.”
Journalists at the Post said Alden had also meddled in editorial decisions. In April, Chuck Plunkett, the paper’s editorial page editor, resigned after saying that an Alden executive had refused to run an editorial that criticized steep cost reductions on the paper.
“It’s awful what’s going to happen,” Larry Ryckman, a former senior editor of the Denver Post, said of Alden’s possible acquisition of Gannett. “For me, becoming owned by Digital First means only one thing — and that’s not good.”
Ryckman said numerous rounds of layoffs had crippled the Post’s newsroom. In May, Post reporters joined other journalists in a protest outside Alden’s offices in Manhattan.
“It was nonstop and beyond demoralizing,” Ryckman said. “It become impossible to get any decent work done.”
Alden was started by Randall Smith and Heath Freeman. Smith made his name on Wall Street by specializing in investments involving distressed debt. Freeman, a former kicker for Duke University’s football team, has helped lead the fund’s strategy of buying newspapers and increasing profits by cutting costs drastically. The firm has not closed any newspapers.
The size of the Post’s staff dropped to fewer than 100 from 184 under Alden, which took control of the paper in 2010. Newsrooms at the Mercury News and the Orange County Register have also shrunk significantly.
A group of reporters and editors who left the Denver newspaper raised more than $161,000 on a crowdfunding platform for a new publication, The Colorado Sun, which began publishing online in September under Ryckman’s leadership.
When word of Alden’s potential pursuit of Gannett began to spread after a report by the Wall Street Journal Sunday night, journalists used Twitter to denounce the possibility.
“Dear @Gannett: I’ve worked for you for 11 years,” Brett Kelman, a Tennessean reporter, wrote. “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.”
Others said it was a terrible development.
“Digital First is the worst owner of newspapers in America and they will do their best to draw blood from even Gannett’s already desiccated stone,” wrote Joshua Benton, the director of Nieman Journalism Lab.
Alden declined to comment.
Gannett’s revenue has been relatively flat from 2014 to the end of 2017, but its profit has shrunk in that time to $97 million from over $280 million. The company has also cut its workforce sharply, including letting go many newsroom employees, over the past few years. A company overview from the end of 2015 recorded 19,600 employees. By the end of 2017, the figure was 15,300.
MNG did not outline how it planned to manage Gannett.
In its letter, MNG was critical of Gannett’s strategy of buying up digital businesses. It has spent over $300 million acquiring online advertising technologies and services, including ReachLocal and WordStream. MNG asked Gannett to immediately start reviewing strategic alternatives and to commit to a freeze on additional acquisitions of digital businesses, which MNG said Gannett had overpaid for in the past.
MNG added that Gannett should also develop a better strategy for the future before hiring a successor to Robert J. Dickey, the chief executive, who is set to leave in May.
MNG said it had approached Gannett several times before about a potential deal, but that it had been ignored. In its letter, MNG criticized Gannett’s “leadership void” and its “ill-fated” attempt in 2016 to take over Tribune Publishing during the period when it was known as Tronc.
“Frankly the team leading Gannett has not demonstrated that it’s capable of effectively running this enterprise as a public company,” MNG wrote.
MNG and Gannett have both been busy buying other media properties in recent years. In 2015, Gannett bought the Journal Media Group, publisher of the Milwaukee Journal Sentinel, for $280 million. The next year, it bought the Record of Bergen County, New Jersey, along with its sibling newspapers, and then began a cost-cutting campaign.
MNG acquired Freedom Communications, the parent company of the Orange County Register, in a bankruptcy auction in 2016, beating a rival bid from Tribune. MNG said Monday that the Register had been “left for dead,” but was “viable and profitable” as a result of its efforts.
It said the same of the Boston Herald, which it bought last year. But employees there and at other publications have accused the company of using layoffs as a first resort when cutting costs — “a dehumanizing way to handle a delicate situation,” one Herald worker wrote on Medium.