The point: Gannett has contributed its share of downsizing to the disappearing U.S. newspaper workforce.
Now, however, a company even more “accomplished” in this sphere seeks to acquire the newspaper colossus. MNG Enterprises Inc. on Monday issued a $1.36 billion takeover proposal of Gannett for $12.00 per share in cash, or 23 percent higher than Gannett’s Friday closing price. There are a lot of acronyms at play in this story: MNG is MediaNews Group, known more commonly as Digital First Media, owned by hedge fund Alden Global Capital.
Nomenclature aside, MNG already has a 7.5 percent ownership stake in Gannett, enough to qualify as its largest active stockholder. In a letter to the Gannett board, MNG attacks its target’s current management, noting that the company’s stock has lost significant value since it was spun off from Gannett broadcasting properties. “During this period, Gannett suffered from a series of value-destroying decisions made by an unfocused leadership team – overpaying for a string of non-core aspirational digital deals and pursuing an ill-fated hostile [takeover] for Tribune Publishing, all while Gannett’s core revenue, EBITDA, margins and Free Cash Flow continue to decline,” notes the MNG letter.
MNG operates about 200 publications, including the Denver Post, the San Jose Mercury News, the Orange County Register and the Boston Herald; Gannett is home to the USA Today Network, a group of “more than 100 local media brands,” including the Des Moines Register, the Cincinnati Enquirer, the Indianapolis Star and the Arizona Republic, not to mention the network’s namesake member. It has gained other nationally recognized brands in recent years, with its acquisition of the Journal Media Group (home to the Milwaukee Journal Sentinel) and Bergen County, N.J., standby the Record.
What’s MNG’s plan for all these properties? Here’s what it said in its Monday release:
We believe that Gannett’s newspaper business could be improved and made more profitable by optimizing the Company’s cost structure and showing discipline in capital allocation with a goal of optimizing EBITDA and Free Cash Flow per share every year. However, instead of focusing on its core newspaper business and acting as the industry consolidator pitched to investors at the time of the spin-off, the Company has spent approximately $350mm on digital acquisitions since 2015. [iv] That $350mm equates to over $3.00 per share, or 36% of Gannett’s entire market capitalization. [i]
Bolding added to highlight jargon that forebodes even more jobs lost in a newspaper sector that shed about 30,000 employees between 2008 and 2017. The folks at MNG have some experience on that front, as The Post’s Margaret Sullivan wrote last year. When it comes to troubled media assets, these hedge funders are prolific on the downsizing front. The MNG brain trust made headlines in 2018 when it slashed the Denver Post to a total staffing level of fewer than 70 positions, down from a time when the Denver Post and the Rocky Mountain News — operating under a joint agreement — had north of 600 journalists. The Rocky Mountain News went belly up in 2009. The pattern at other acquisitions — including the Orange County Register and the San Jose Mercury News — has been similar: Slash, and slash some more, while Alden executives take home millions.
So what’s left to cut at the Gannett properties? “I honestly don’t know what the next step ... looks like and what additional costs cuts or savings [MNG] would be able to find. My fear is that it would involve Bangalore,” says Paul Singer, former politics editor for USA Today. Despite all the flak that Gannett takes for its own layoffs and buyouts, Singer says the chain still knows why it’s in business. “There’s still an understanding that there’s a love of the papers, a love of the product, a love of the news,” says Singer, who now works as investigations editor for WGBH and the New England Center for Investigative Reporting. “I have believed at times that people at Gannett were out of their minds, but I never believed they were in it just to try to make a buck. That’s what worries me about [MNG].”
Over his six-year tenure at Gannett, Singer watched as management squeezed the organization for every last redundancy. One example: In 2015, Gannett closed the Washington bureau of the Louisville Courier-Journal, which was essentially one guy: James R. Carroll, who’d been on the Washington beat for the newspaper for more than 17 years. “Needless to say,” wrote Carroll in a farewell column at the time, “I would prefer a different decision. But the move is a sign of the continuing economic pressures on the nation’s news organizations, particularly newspapers, that have led to many Washington bureau closings over the past decade or so.”
As Singer recalls, Carroll had the “best sourcing” and the best stories about Kentucky Republican Mitch McConnell and adjacent topics. When the company closed the Washington bureau for Louisville’s Courier-Journal, the thinking went like this, according to Singer: “We’re just going to take our coverage from rest of the Gannett Washington bureau, from USA Today,” recalls Singer. “The problem is that USA Today had been leaning on Jim Carroll." The lesson: “You can’t keep saying, ‘We’ll pull that resource from somewhere else,’ until you’ve finally realized that there’s nowhere to pull it from," he says.
Gannett issued a statement about the move: “Consistent with its fiduciary duties and in consultation with its financial and legal advisors, the Gannett board of directors will carefully review the proposal received to determine the course of action that it believes is in the best interest of the company and Gannett shareholders. No action needs to be taken by Gannett shareholders at this point.”
Or ever, for that matter. Keep these hedge-funders away from our journalism.