Reiterates that all of MNG’s Nominees Are
Highly Conflicted and Have an Established History of Value
Destruction
Highlights Gannett’s Progress in Executing its
Ongoing Digital Transformation
Underscores the Broad and Deep Expertise and
Experience of All Eight of Gannett’s Actively Engaged, Independent
Director Nominees
Gannett Co., Inc. (NYSE: GCI) (“Gannett” or “company”) today
issued an open letter to shareholders urging them to vote TODAY
“FOR ALL” of the company’s eight independent director nominees in
advance of the upcoming 2019 Annual Meeting of Shareholders
scheduled to be held on May 16, 2019. The text of the letter
follows below:
May 13, 2019
Dear Fellow Shareholder,
Gannett’s Annual Meeting on May 16, 2019 is fast approaching,
and it is important that all shareholders vote as soon as possible.
Your board of directors urges you to vote “FOR ALL” of the
company’s eight highly experienced, actively engaged, independent
director nominees by Internet or by phone using the WHITE proxy
card. To ensure your shares are represented at the meeting, please
vote by 11:59 p.m. ET on Wednesday, May 15, 2019.
ALL OF MNG’S CANDIDATES ARE HIGHLY
CONFLICTED
All three of the candidates nominated by MNG Enterprises, Inc.
(“MNG”) have close ties to MNG and its majority shareholder, Alden
Global Capital (“Alden”), that give rise to clear conflicts of
interest with respect to any transaction involving MNG, as well as
certain of Gannett’s operations, since MNG is a competitor to both
Gannett’s print operations as well as its digital marketing
solutions business. More specifically:
- Steven Rossi was CEO of MNG
until his recent retirement in November 2017. In light of his
employment by MNG within the last three years, he is not
independent of MNG under New York Stock Exchange (“NYSE”) rules.
Mr. Rossi also has other ties to MNG and Alden – including by
serving as a director on the board of Fred’s, Inc. (“Fred’s”), a
publicly traded regional pharmacy chain controlled by Alden and MNG
(through an MNG subsidiary), where he was appointed and continues
to serve pursuant to a Cooperation Agreement between Fred’s, Alden,
Heath Freeman and an MNG subsidiary.
- Heath Freeman is the president
and a founding member of Alden, vice chairman of MNG and chairman
of the board of Fred’s, where he was appointed pursuant to the same
Cooperation Agreement as Mr. Rossi. Like Mr. Rossi, he is not
independent of MNG under NYSE rules in light of his current service
on MNG’s board and as an Alden executive.
- Dana Goldsmith Needleman is also
a director of Fred’s, as well as a long-time family friend of Mr.
Freeman. Ms. Needleman and Mr. Freeman knew each other for years
prior to Ms. Needleman being hand-picked to serve on the Fred’s
board. Further, Ms. Needleman’s spouse represented Alden in real
estate dealings, and Ms. Needleman made a sizeable personal
donation to one of her and Mr. Freeman’s alma mater’s organizations
where Mr. Freeman is chairman of the advisory board. It cannot
reasonably be concluded that Ms. Needleman has “no material
relationship” with Alden, and she is therefore likewise NOT
independent of MNG under NYSE rules.
Given the conflicts of interest of MNG’s nominees, shareholders
should question whether ANY could act in the best interests of all
Gannett shareholders rather than being unduly influenced by or
beholden to MNG and Alden.
MNG’S NOMINEES WOULD BRING NOTHING TO THE
GANNETT BOARD
EXCEPT A PROPENSITY FOR VALUE
DESTRUCTION
MNG is seeking to replace three of Gannett’s directors,
including distinguished journalists Stephen Coll and Larry Kramer,
with a hedge fund president, a real estate dealmaker and a propane
company manager turned newspaper executive without any background
in journalism – all of whom have a history of value
destruction.
Notably, Mr. Freeman, Mr. Rossi and Ms. Needleman have nearly no
public board experience outside of serving together on the Fred’s
board, where they were appointed because of their ties to MNG and
Alden, not because of their qualifications. Together, these three
nominees have overseen significant value destruction: Fred’s
stock price has declined 97%1 since Alden acquired a significant
stake in late 2016, 96%2 since Mr. Rossi joined the board in 2017
and 77%3 since Mr. Freeman, Mr. Rossi and Ms. Needleman began
serving as a majority of the Fred’s board in 2018. Of note, MNG’s
nominees delivered these extraordinarily poor results while Fred’s
was operating in a steadily growing market.4
What is even more concerning – Fred’s recently disclosed in its
Form 10-K for 2018 that it is now in default under its credit
agreement and that there is substantial doubt regarding its ability
to continue as a going concern. The filing acknowledges that Fred’s
has had “significant net losses and negative cash flows from
operating activities in recent years” and notes that the company
“cannot offer assurance that such losses and negative cash flows
will not continue for the foreseeable future.”
Rather than positioning Fred’s for success, MNG’s nominees,
as directors constituting a majority of the Fred’s board, have
taken actions that have harmed the company and put Fred’s at risk.
We note that the actions MNG’s nominees have taken at Fred’s are
consistent with those implemented at newspapers managed by MNG
during Mr. Rossi’s and Mr. Freeman’s tenure and at Alden’s other
major portfolio companies, including Payless ShoeSource, which
recently filed for bankruptcy for the second time in two years. Is
this the future that you want for Gannett?
Further, the Department of Labor is reportedly investigating
Alden’s past management of MNG’s pension funds. The ongoing
inquiry seems likely to involve the period when Mr. Rossi was CEO
of MNG and Mr. Freeman was a director of MNG, as well as president
of Alden. By law, pension plan managers are required to invest plan
assets solely in the interest of plan participants and their
beneficiaries, and not with a view toward their own self-interests.
While the exact nature of the Department of Labor’s investigation
has not been made public, we know that in 2016, approximately 90%
of certain of MNG’s pensions — and nearly $250 million of MNG’s
total employee pension savings — was invested in Alden funds.5
Additionally, in recent litigation, MNG’s largest minority
shareholder noted it was “investigating possible mismanagement and
breaches of fiduciary duty” by the directors and officers of
MNG and its controlling shareholder Alden, focusing again on the
period when Mr. Rossi was CEO of MNG and Mr. Freeman was a director
of MNG, as well as president of Alden. These practices, lawsuits
and ongoing Department of Labor investigation should raise serious
questions about the judgment, incentives and oversight of MNG’s
nominees.
YOUR BOARD AND MANAGEMENT TEAM ARE MAKING
PROGRESS IN OUR DIGITAL TRANSFORMATION TO DELIVER ENHANCED
SHAREHOLDER VALUE
Over the last three years, your board and management team have
taken decisive actions to position Gannett to thrive in a digital
future by building a best-in-class digital marketing solutions
organization and local-to-national news network that have driven
growth in digital subscribers, audience engagement and advertising
and marketing services revenues. While the company’s transformation
strategy is ongoing, we have made significant progress. In 2018,
Gannett:
- Grew digital subscribers by 46%,
bringing total paid digital-only subscribers to over 500,000.
- Grew ReachLocal revenues by 15%.
- Grew national digital advertising
revenue by 19%, with 75% of USA TODAY’s advertising revenue now
digital.
The company has continued to build on this progress in the first
quarter of 2019, as reflected by:
- Total digital revenues reaching 37% of
total revenues, and total digital advertising and marketing
services revenues totaling 49% of total advertising revenues.
- Paid digital-only subscribers
increasing to 538,000, a 39% year-over-year increase. These
subscriber volumes represent a 1.4% paid conversation rate of our
local unique web visitors.
We are the first to acknowledge that transformations are hard
and take time, and that we have more work to do. That said, we are
confident that our strategy has put Gannett on the best path to
deliver value in the near term, while upholding the company’s
commitment to journalistic excellence.
Regardless of our confidence in this plan, your board
regularly evaluates our strategic options to ensure that we are
best positioned to deliver value for our shareholders. We have
repeatedly stated that we would engage with any party that makes a
bona fide, credible proposal that appropriately values the company
and is capable of being closed. MNG’s proposal has never
satisfied that test.
LEADING INDEPENDENT PROXY ADVISORY FIRMS
RECOMMEND GANNETT SHAREHOLDERS VOTE “FOR ALL” OF THE COMPANY’S
INDEPENDENT DIRECTOR NOMINEES ON THE WHITE PROXY CARD
Leading independent proxy advisory firms, Glass Lewis & Co.
(“Glass Lewis”) and Egan-Jones Proxy Services (“Egan-Jones”), share
our view and both recommend that Gannett shareholders vote “FOR
ALL” eight of Gannett’s highly experienced, independent director
nominees on the WHITE proxy card.
In its May 6, 2019 report, Glass Lewis stated6:
- “…we do not believe the Dissident has
made a strong case that the Gannett board is in need of, or would
benefit from, additional real estate expertise that would be
provided by Dissident Nominee Dana Needleman or from additional
newspaper operating experience that would be provided by Dissident
Nominee Steven Rossi. We also question the turnaround expertise of
all three Dissident Nominees, who serve together on the board of
Fred’s Inc. and have presided over the loss of significant
shareholder value at that company.”
- “MNG appears to have conflicting
priorities and its behavior both before and after submitting its
bid suggests that MNG does not have a sincere interest in acquiring
the Company, despite many statements to that specific intent.”
- “Here, we do not believe MNG has
presented a credible offer and we see no reason to believe adding
one or more Dissident Nominees to the board would make the
Dissident’s offer more credible. In light of these factors and in
the absence of any significant governance concerns with the
incumbent board, we believe support for the Management Nominees is
warranted.”
In its May 6, 2019 report, Egan-Jones stated7:
- “We believe that the Company has a
strategic plan to bring both short-term and long-term growth to the
Company, as opposed to MNG’s unsolicited proposal, which we believe
undervalues the worth of the Company.”
- “In our view, the management slate has
the right mix of qualifications, experience and diversity contrary
to MNG’s slate, which we believe, will not deliver any incremental
benefits to the incumbent Board and fell short of independence as
evidenced by the affiliation with Alden.”
TIME IS SHORT – ENSURE YOUR VOICE IS
HEARD
BY VOTING THE WHITE PROXY CARD TODAY – BY PHONE OR BY
INTERNET
Remember, a vote “FOR ALL” of Gannett’s nominees on the WHITE
proxy card is a vote FOR a board:
- Composed of entirely independent
directors, who are not beholden to or influenced by ANY outside
entity.
- With broad and deep experience and
skills in areas that are critical to Gannett’s ongoing business
transformation.
- Committed to realizing Gannett’s
potential and maximizing the value of the company’s assets for the
benefit of all shareholders.
Please simply follow the easy instructions on the WHITE proxy
card to submit your proxy by telephone or by Internet TODAY.
We thank you for your continued support.
Sincerely,
/s/
J. Jeffry Louis, Chairman of the Gannett board of directors
If you have any questions, or need assistance
in voting
your shares, please call the firm assisting
us
in the solicitation of proxies:
INNISFREE M&A INCORPORATED
TOLL-FREE at 1-877-456-3507
Additional materials regarding the board of
directors’ recommendations for the annual meeting are available on
the investor relations page of Gannett’s website at
https://investors.gannett.com.
Greenhill & Co., LLC and Goldman Sachs & Co. LLC are
acting as financial advisors and Skadden, Arps, Slate, Meagher
& Flom LLP is acting as legal advisor to Gannett.
About Gannett
Gannett Co., Inc. (NYSE: GCI) is an innovative, digitally
focused media and marketing solutions company committed to
strengthening communities across our network. With an unmatched
local-to-national reach, Gannett touches the lives of more than 125
million people monthly with our Pulitzer-Prize winning content,
consumer experiences and benefits, and advertiser products and
services. Gannett brands include USA TODAY NETWORK with the iconic
USA TODAY and more than 100 local media brands, digital marketing
services companies ReachLocal, WordStream and SweetIQ, and U.K.
media company Newsquest. To connect with us, visit www.gannett.com.
Forward-Looking Statements
This communication contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements include all statements that are
not historical facts. The words “believe,” “expect,” “estimate,”
“could,” “should,” “intend,” “may,” “plan,” “seek,” “anticipate,”
“project” and similar expressions, among others, generally identify
forward-looking statements, which speak only as of the date the
statements were made and are not guarantees of future performance.
Where, in any forward-looking statement, an expectation or belief
as to future results or events is expressed, such expectation or
belief is based on the current plans and expectations of our
management and expressed in good faith and believed to have a
reasonable basis, but there can be no assurance that the
expectation or belief will result or be achieved or accomplished.
Whether or not any such forward-looking statements are in fact
achieved will depend on future events, some of which are beyond our
control. The matters discussed in these forward-looking statements
are subject to a number of risks, trends, uncertainties and other
factors that could cause actual results or events to differ
materially from those projected, anticipated or implied in the
forward-looking statements, including the matters described under
the heading “Risk Factors” and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” in the
company’s annual report on Form 10-K for fiscal year 2018 and in
the company’s other SEC filings.
1 Based on Fred’s closing stock prices on May 10, 2019 and
December 21, 2016 (the day prior to the filing of Alden’s initial
13D).
2 Based on Fred’s closing stock prices on May 10, 2019 and April
21, 2017 (the last trading day prior to Mr. Rossi joining the
Fred’s board).
3 Based on Fred’s closing stock prices on May 10, 2019 and June
25, 2018 (the day of Fred’s 2018 annual meeting).
4 Source: Euromonitor. Statement based on 2013-2018 CAGR of 3%
for drugstores/pharmacies in the U.S.
5 Sola Ltd and Ultra Master Ltd v. MNG Enterprises, DE Court of
Chancery Case No. 2018-0134-JRS, March 19, 2018. See also: Filings
with the Department of Labor; Jonathan O'Connell. “The hedge fund
trying to buy Gannett faces federal probe after investing newspaper
workers’ pensions in its own funds,” The Washington Post, April 17,
2019.
6 Permission to use quotations neither sought nor obtained.
7 Permission to use quotations neither sought nor obtained.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190513005420/en/
For investor inquiries, contact:Stacy CunninghamVice
President, Financial Planning & Investor
Relations703-854-3168investors@gannett.com
Arthur Crozier / Jennifer Shotwell / Larry MillerInnisfree
M&A Incorporated(212) 750-5833
For media inquiries, contact:Amber AllmanVice President,
Corporate Events & Communications703-854-5358aallman@gannett.com
Ed Trissel / Nick Lamplough / Tim RagonesJoele Frank, Wilkinson
Brimmer Katcher(212) 355-4449
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