Sends Letter to Gannett Shareholders
Soliciting Votes on the BLUE Proxy Card for ALL THREE MNG Nominees:
Heath Freeman, Dana Needleman, Steven Rossi
Reaffirms That MNG Nominees Will Serve as
Immediate Catalyst for Change; Seek to Maximize Value for All
Gannett Shareholders; Support A Full Review of Strategic
Alternatives
Believes Only Chance to Increase Gannett’s
Stock Price is by Electing ALL THREE MNG Nominees to the
Board
MNG Enterprises, Inc. (“MNG”), owner and operator of one of the
largest newspaper businesses in the U.S. and the largest active
shareholder in Gannett Co., Inc. (NYSE:GCI) (“Gannett” or the
“Company”), with an approximate 7.4% ownership interest, has mailed
a letter to its fellow Gannett shareholders, urging them to vote on
the BLUE Proxy card for MNG’s
three highly qualified director nominees.
MNG believes that the election of ALL
THREE of MNG’s nominees is needed to send a clear
message to the incumbent directors that the status quo is not
acceptable, and the Board needs to explore all possible ways to
enhance value for all Gannett shareholders.
The full text of the letter, which outlines the need for change
at Gannett, follows.
May 8, 2019
Dear Fellow Gannett Shareholders:
MNG ENTERPRISES URGES GANNETT
SHAREHOLDERS:
VOTE FOR CHANGE
NOW!
The annual meeting of shareholders of Gannett Co., Inc.
(“Gannett” or the “Company”) to be held on May 16, 2019 offers you
a clear choice: either endorse the Company’s current board of
directors (the “Board”) and Gannett’s status quo, with its
prolonged underperformance since its 2015 spin-off and its risky,
unproven and unprofitable “digital transformation”,1 OR vote on the
BLUE Proxy card for
ALL THREE of MNG’s highly
qualified director nominees who will serve as an immediate catalyst
for change to maximize value for all Gannett shareholders,
including by supporting a full review of strategic
alternatives.
The choice is clear:
MNG NOMINEES: “VALUE CATALYST”
- Support immediately commencing a full
review of strategic alternatives to maximize value for all
shareholders
- MNG’s premium $12/share cash offer to
acquire Gannett
- All other offers duly considered
- New perspective on running core
business profitably and sustainably
- Moratorium on overpriced and
value-destructive digital acquisitions
GANNETT INCUMBENTS: “STATUS QUO”
- Core business in decline
- Continuing underperformance in Q1 with
no end in sight – additional declines projected for 2019
- Failure to adequately explore premium
cash acquisition offer
- Risky, unproven and unprofitable
“digital transformation” strategy
- Leadership void: no CEO and departure
of the head of ReachLocal in early 2019
- Increased leverage since 2015 spin-off
2
THE VERDICT IS IN:
THE INCUMBENT BOARD’S DIGITAL TRANSFORMATION
STRATEGY HAS FAILED TO GENERATE PROFITABLE GROWTH AND CONTINUES TO
DESTROY VALUE FOR GANNETT SHAREHOLDERS
Gannett’s most recent earnings announcement confirms what MNG
has been saying all along – that Gannett is an underperformer and
its multi-year “digital transformation” is not working and
extremely unlikely to produce a $12 per share valuation. Gannett’s
key performance metrics have continued to worsen and the Company’s
performance since its 2015 spin-off looks even worse given
Gannett’s first quarter 2019 results. This includes:
- Net Income is down 98% since
spin-off;3
- Diluted Earnings Per Share is down 98%
since spin-off;3
- Operating Income is down 90% since
spin-off;3 and
- Free Cash Flow is down 66% since
spin-off.3
Gannett’s supposed panacea – its “digital transformation” – is
highly risky and, in the words of Institutional Shareholder
Services, Inc. (“ISS”), “yet to bear fruit.” As ISS stated in its
report: 4
“Moreover, it is worth noting that GCI's digital
transformation has yet to bear fruit, as evidenced by the fact that
ReachLocal has had operating expenses in excess of revenue every
year since FY2016, while the publishing segment's operating
income and operating margin have declined since 2016 (despite
digital sources accounting for a larger proportion of the segment's
revenue mix) – these factors, along with the earnings and revenue
miss in February, suggest that there is execution risk inherent
in the standalone plan.” (emphasis added).4
We believe Gannett is acting like a 1990s dot.com internet
company, touting clicks, eyeballs and selling cheap digital
subscriptions instead of focusing on what truly drives value –
profitability. We believe there is little reason to believe that
Gannett’s digital transformation strategy will turn things around
at Gannett, or that Gannett has the leadership team in place to
execute that strategy. Starting May 7th, Gannett is without a CEO
and is run by a newly appointed interim COO with a predominantly
legal (rather than operational) background.
Gannett’s struggles were chronicled just days ago in The Wall
Street Journal,5 which wrote:
“Local papers have suffered sharper declines in circulation than
national outlets and greater incursions into their online
advertising businesses from tech giants such as Alphabet Inc.’s
Google and Facebook Inc. The data also shows that they are
having a much more difficult time converting readers into paying
digital customers… Gannett, which has a big audience across its
local papers, is especially inefficient, converting just 0.4% of
its digital audience into paying subscribers, according to the
Journal’s analysis of digital audience and subscription data.”
(emphasis added).5
THE BEST WAY TO ENSURE MUCH-NEEDED CHANGE AT
GANNETT IS TO VOTE FOR ALL THREE MNG
NOMINEES
We appreciate that leading shareholder advisory firm ISS has
recognized the need for change at Gannett. But to truly bring about
change, it is imperative that shareholders vote the BLUE card for ALL
THREE of MNG’s nominees – Heath Freeman, Dana
Needleman and Steven Rossi. The election of ALL THREE of MNG’s nominees is
needed to send a clear message to the incumbent directors that the
status quo is not acceptable, and the Board needs to explore all
possible ways to enhance value for all Gannett shareholders.
Without the election of ALL
THREE of MNG’s nominees, the incumbent directors may
continue to resist any change to the Company’s current strategy,
despite severe declines in profitability and value destruction
since Gannett’s 2015 spin-off.
VOTE THE BLUE
CARD FOR FREEMAN, NEEDLEMAN &
ROSSI
MNG’s nominees will be strong advocates for change and have the
right mix of newspaper turnaround, real estate, and capital
allocation expertise to improve the Gannett Board; would provide
the objective perspective, experience and oversight required to put
Gannett on the path to a profitable and sustainable future; and are
committed to maximizing value for all Gannett shareholders now
before further value is destroyed.
MNG’s nominees are committed to listening to all Gannett
shareholders and exploring all possible ways to enhance value at
Gannett. As seen by MNG’s switch to a minority slate that was based
on feedback from other Gannett shareholders who wanted meaningful
Board change but also wanted to preserve continuity at the Board,
MNG and its nominees embrace and respect the views of all Gannett
shareholders. Our sole focus is to maximize value for all
shareholders, and if elected, our three nominees will aim to serve
as a true shareholder voice on the Gannett Board.
Sincerely,
/s/ R. Joseph FuchsOn behalf of the Board of Directors, MNG
Enterprises, Inc.Chairman, R. Joseph Fuchs
Okapi Partners LLC is assisting us with the
solicitation of proxies. If you have any questions or require
assistance in authorizing a proxy or voting your shares of Common
Stock, please contact:
Okapi Partners LLC1212 Avenue of the Americas,
24th FloorNew York, New York 10036
(212) 297-0720 (Main)Stockholders Call
Toll-Free: (888) 785-6668Email: info@okapipartners.com
www.SaveGannett.com
We encourage all shareholders to carefully review this letter to
understand more about why change is needed now and why MNG’s
nominees are best positioned to Save Gannett. Additional
information about MNG, its proposal to acquire Gannett, and its
nominees is available at www.SaveGannett.com. We urge all
shareholders to VOTE THE BLUE CARD
“FOR” MNG’s independent slate of Director Nominees.
Your vote is important, no matter how many
shares you own!
Please remember NOT TO RETURN the Company’s WHITE PROXY CARD! If
you return a Gannett proxy card – even by simply indicating
“withhold” on the Company’s slate – you will revoke any vote you
had previously submitted for the MNG nominees on the BLUE proxy
card.
Moelis & Company LLC is acting as financial advisor to MNG.
Akin Gump Strauss Hauer & Feld LLP and Olshan Frome Wolosky LLP
are serving as its legal counsel. Okapi Partners LLC is acting as
MNG’s proxy solicitor.
About MNG Enterprises
MNG Enterprises, Inc. is one of the largest owners and operators
of newspapers in the United States by circulation, with
approximately 200 publications including The Denver Post, The
Mercury News, The Orange County Register and The Boston Herald. MNG
is a leader in local, multi-platform news and information,
distinguished by its award-winning original content and high
quality, diversified portfolio of both print and local news and
information web sites and mobile apps offering rich multimedia
experiences across the nation. For more information, please visit
www.medianewsgroup.com.
Additional Information
MNG Enterprises, Inc., together with the other participants in
its proxy solicitation (collectively, “MNG”), have filed a
definitive proxy statement and an accompanying BLUE proxy card with
the Securities and Exchange Commission (the “SEC”) to be used to
solicit votes for the election of MNG’s slate of highly-qualified
director nominees at the 2019 annual meeting of stockholders (the
“Annual Meeting”) of Gannett Co., Inc. (the “Company”).
Stockholders are advised to read the proxy statement and any other
documents related to the solicitation of stockholders of the
Company in connection with the Annual Meeting because they contain
important information, including additional information relating to
the participants in MNG’s proxy solicitation. These materials and
other materials filed by MNG in connection with the solicitation of
proxies are available at no charge on the SEC’s website at
www.sec.gov. The definitive proxy statement and other relevant
documents filed by MNG with the SEC are also available, without
charge, by directing a request to MNG’s proxy solicitor, Okapi
Partners LLC, at its toll-free number (888) 785-6668 or via email
at info@okapipartners.com.
###
1 Since spin-off, Gannett has spent $350mm on digital
acquisitions while diluted EPS has declined 98% (represents decline
in trailing 12 months diluted EPS from June 28, 2015 to March 31,
2019). 2 Gannett moved from a net cash position of $62mm as of June
28, 2015 to a net debt position of $211mm as of March 31, 2019. 3
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 March 31, 2019. 4 Gannett Co.,
Inc. – ISS report published on May 2, 2019; permission to quote
from report was neither sought nor obtained. 5
In News Industry, a
Stark Divide Between Haves and Have-Nots, Local newspapers
are failing to make the digital transition larger players did — and
are in danger of vanishing, Keach Hagey, Lukas I. Alpert and Yaryna
Serkez, Wall Street Journal, 4 May 2019.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190509006022/en/
MEDIA:ReevemarkPaul Caminiti / Hugh Burns / Renée
Soto+1
212.433.4600MNGInquiries@reevemark.comINVESTORS:Okapi
Partners LLCBruce Goldfarb/Pat McHugh+
212.297.0720info@okapipartners.com
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