Gannett further rebukes MNG's offer, built on debt

A hedge fund-owned newspaper company that sought to acquire Gannett Co. pitched a $1.8 billion deal funded exclusively with debt during a meeting with company officials last week – a move that Gannett said underscores its decision to reject the offer.

Representatives from MNG Enterprises Inc., also known as Digital First Media, met with Gannett privately on Thursday. MNG framed its offer as a transaction that would amount to "a merger or combination, not the acquisition proposal that MNG had previously put forth," Gannett said in a press release Monday.

Since the proposed tie-up relies solely on new financing, the deal would inevitably lead to steep cost cuts to enable the combined company to pay off the new debt, said a person familiar with the talks who was not authorized to speak publicly on the matter.

The revelations mark the latest development in a high-stakes tug-of-war for control of Gannett, which owns USA TODAY, more than 100 local media brands and digital marketing assets such as ReachLocal and SweetIQ.

On Feb. 4, Gannett said its board had unanimously rejected MNG's unsolicited bid to buy the company for $12 per share, saying it was not "credible."  A deal would include Gannett's existing debt, which is about $338 million, according to S&P Global.

MNG followed up on Thursday by nominating six people with ties to MNG or its majority owner Alden Global Capital to Gannett's board of directors. They included Alden President Heath Freeman, MNG Executive Chairman R. Joseph Fuchs and MNG Chief Operating Officer Guy Gilmore.

More: MNG/Digital First Media launches proxy fight for seats on USA TODAY owner Gannett's board

More: Gannett rejects takeover offer from MNG/Digital First Media

More: Digital First $1.4B Gannett value too low, cost-cutting hopes likely unrealistic: Analysts

"We hope that Gannett and its advisors review our compelling offer and analysis shared today with the same sincerity that we demonstrated in today's meeting," MNG said Thursday in a statement. "We look forward to an expeditious response and stand ready to enter into negotiations."

The Gannett board currently has 10 members. It will be reduced to nine after the company's next stockholder meeting, according to a recent filing with the Securities and Exchange Commission.

With six people on the board, MNG allies would effectively control Gannett's future.

"We are disappointed that at the meeting on February 7, MNG again failed to provide substantive answers to the basic questions Gannett has repeatedly raised," Gannett Chairman J. Jeffry Louis said in a statement Monday morning. "Instead, MNG offered vague and generic statements that further confirmed the board's decision to reject MNG's proposal."

Gannett said MNG stated during the meeting "that it had neither secured financing for a potential transaction nor even reached out to potential financing sources."

MNG has argued that Gannett has failed to deliver enough value for its shareholders and that its own management team has done an effective job at bolstering profits at Digital First, whose publications include the Denver Post and the Boston Herald.

Gannett said in its Monday press release that at least three of MNG's candidates "may be legally incapable of serving on the Gannett board under applicable antitrust laws, given their roles with MNG, which is a competitor of Gannett."

Other problems with MNG's proposal include the fact that 78-year-old Fuchs, one of the nominees, is older than Gannett's mandatory retirement age for directors, Gannett said.

Gannett has not yet announced a date for its annual stockholder meeting, where shareholders will vote on the board nominees.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.