A shareholder advisory service sided with Gannett in its effort to fend off the hostile takeover attempt of a hedge fund-controlled newspaper company.
Glass Lewis, which advises shareholders on governance issues, recommended that Gannett stockholders reject the unsolicited bid and board nominees from MNG Enterprises.
Glass Lewis on Tuesday released a report casting “serious doubt about the credibility” of MNG’s offer to acquire Gannett for $12 per share and saying Gannett’s current team has performed ably in spite of major challenges to the media industry.
Gannett owns USA TODAY, more than 100 other publications and various digital marketing assets, including ReachLocal.
MNG’s publications include The Denver Post and San Jose Mercury News.
“Overall, while there are certainly challenges facing the Company, and the transition to digital strategy advocated by the incumbent board is far from proven, we find it difficult to fault the current leadership team for delivering performance that has largely kept pace with industry peers,” Glass Lewis wrote.
The report comes less than a week after a Glass Lewis industry peer, Institutional Shareholder Services, endorsed one of three MNG nominees to the Gannett board, former MNG CEO Steven Rossi. The other two nominees are Cogent Group Principal Dana Goldsmith Needleman and Alden President and MNG Vice Chairman Heath Freeman.
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MNG had originally nominated six people to Gannett’s board, which would have given the Alden Global Capital-owned company control of Gannett. MNG withdrew three of its six initial nominees in April but maintained its offer to buy Gannett, which Gannett has rejected as not credible.
“Having evaluated the arguments made by MNG and the incumbent board’s response, we do not believe there is sufficient basis to support the Dissident’s campaign in favor of board representation at this time,” Glass Lewis wrote.
Another advisory firm, Egan-Jones Proxy Services, also sided with Gannett’s board members, according to Gannett.
The reports “send a strong message that we have the right board and strategy in place to drive long-term value creation for all Gannett shareholders,” Gannett said Tuesday in a statement. “We are pleased that Glass Lewis and Egan-Jones share our belief that the broad and diverse backgrounds, professional experiences and skills of Gannett’s eight nominees make them uniquely qualified to continue to oversee Gannett during this critical time of the company’s ongoing digital transformation.”
MNG said in a statement: “We firmly believe that shareholders must hold the incumbent Board accountable for the Company’s track record of significant underperformance and for the Board’s failure to take the necessary steps to maximize shareholder value in favor of continuing to pursue a digital transformation strategy that Glass Lewis admits is ‘far from proven.'”
MNG has argued that it can run Gannett more efficiently and has criticized Gannett for investing in digital acquisitions. MNG has signaled plans to cut costs, sell real estate and slash executive pay at Gannett if it wins its bid to acquire the media company.
Gannett has said it is committed to managing costs and pursuing a digital transformation through the USA TODAY Network, which includes the Detroit Free Press, Arizona Republic, Indianapolis Star and Milwaukee Journal-Sentinel.
MNG critics say the company’s track record of imposing significant cuts at its publications does not offer a plausible route to growth.
Gannett shareholders will vote on the board nominees at the company’s annual meeting May 16. Eight Gannett board members are up for reelection.
Like ISS, Glass Lewis noted that a legitimate offer to acquire Gannett for $12 would potentially be attractive. But MNG’s failure to line up financing for the proposed acquisition and its decision not to negotiate in private before publicizing its bid suggests it may not have “a sincere interest in completing the proposed transaction,” Glass Lewis said.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.