Digital First Media, the hedge fund-controlled firm known for extreme cost-cutting in newsrooms from the Philadelphia suburbs to California, is making a $1.4-billion hostile bid for Gannett Co., the publisher of more than 100 daily newspapers, including USA Today.
In an open letter to the Gannett board, the firm proposed on Monday to acquire the company for $12 a share, or 41 percent of the company's closing stock price on Dec. 31, and called for the company to halt investments into digital news properties. Gannett shares were trading at around $11.70, up nearly 20 percent, by mid-day Monday.
The firm making the offer is MNG Enterprises, better known as Digital First and part of New York hedge fund Alden Global Capital LLC. A deal, if it goes through, would make Digital First the largest publisher of newspapers in the country.
"Really their biggest claim ... is cutting costs," Rick Edmonds, media business analyst for the non-profit Poynter Institute in Florida, said of Digital First. "This should be worrisome for Gannett employees."
The Digital First bid surprised industry experts on Monday because the company has built its national chain of newspapers over the last decade by acquiring distressed or bankrupt papers and then cutting their staffs to the bone and selling off buildings.
Gannett had $711 million in revenues and $13.4 million in profits, along with cash of $108 million, for the quarter ended on Sept. 30. Based on last Friday's closing price, stock market investors valued the company at $1.32 billion.
"Frankly, the team leading Gannett has not demonstrated that it's capable of effectively running this enterprise as a public company," MNG Enterprises said in a letter distributed publicly on Monday. "Gannett shareholders cannot sit by and watch further value erode while the board casts about for a strategy and a leader, especially when there is an opportunity to maximize value right now."
Gannett confirmed the offer on Monday morning, saying in a statement that it will review it. "No action needs to be taken by Gannett shareholders at this point," it said.
"You can imagine what the mood is," said one employee at the Courier-Post in Cherry Hill, N.J., a Gannett newspaper, on Monday. All calls were being referred to Gannett's corporate headquarters in Virginia.
Gannett newspapers include the Detroit Free Press, the Arizona Republic and the Milwaukee Jounal Sentinel. Other Digital First newspapers include the Denver Post and the Orange County Register in California.
A deal would consolidate Digital First's hold on the newspaper market in Philadelphia region as it already controls newspapers the Mercury in Pottstown, the Times Herald in Norristown, the Daily Local News in West Chester and the Daily Times in Delaware County, Pa.
With Gannett's News Journal in Wilmington, Del., and the Courier-Post in Cherry Hill, N.J., Digital First could consolidate its news gathering and printing operations. Digital First "could run the whole group as a large cluster and I would look for deeper cuts," the Poynter's Edmonds said.
Gannett papers in the Philadelphia region
Asbury Park, N.J. _ Asbury Park Press
Bergen Co., N.J. _ Record
Cherry Hill, N.J _ Courier-Post
Wilmington, Del. _ News-Journal
Digital First papers in the Philadelphia region
Pottstown, Pa. _ Mercury
Norristown, Pa. _ Times-Herald
West Chester, Pa _ Daily Local News
Delaware Co., Pa. _ Daily Times
Digital First earned $160 million in profits on $939 million in revenue in 2017, according to the NiemanLab at Harvard. The Philadelphia-area newspapers, a major hub for Digital First, contributed $61 million in revenue and $18 million in profits, and led the company in profit margin, with a surprising 30 percent.
The Harvard article was headlined: "Alden Global Capital is making so much money wrecking local journalism that it might not want to stop anytime soon."
In the Philadelphia area, Digital First has closed and sold newspaper buildings, consolidated layout and editing, and cut staff.
At the Times Herald in Norristown, the company has cut staff by 73 percent over the last six years, to 12 union-covered employees, among them three reporters, the NewsGuild of Greater Philadelphia said in 2018. The Mercury in Pottstown, also a Digital First paper, has seen an 83 percent drop to 19 union-employees over the same period, the union said.
In Delaware County, Digital First sold the Daily Times building and five acres in Upper Darby for $2 million for a CubeSmart storage unit, in 2016. The paper relocated its newsroom and offices to a former CVS and bicycle shop at an intersection in Springfield Township. The guild said in 2018 that 25 union-covered employees are left at the Times, a 78 percent decline from the 112 employees six years ago.
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