Hedge fund-backed media group makes offer to buy USA Today publisher Gannett

Hedge fund-backed media group makes offer to buy USA Today publisher Gannett
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Digital Media First, a hedge fund-backed media group, on Monday announced that it has made an offer for Gannett Co., the publisher of USA Today.

The Denver-based Digital Media First, which has purchased struggling newspapers in the recent past which have mostly resulted in cost-cutting and major layoffs, is offering Gannett $12 a share. Gannett closed at $9.75 at the end of trading on Friday. Its 52-week high was $12.23.

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In a letter to Gannett's board, Digital Media First noted that it has lost more than 40 percent of its value in the last 2 1/2 years and "has not demonstrated that it's capable of effectively running this enterprise as a public company."

"Gannett has lost 41% of its value since its debut as a public company two and a half years ago, significantly underperforming its peer group and indices," the letter reads. "During this period, Gannett suffered from a series of value-destroying decisions made by an unfocused leadership team – overpaying for a string of non-core aspirational digital deals and pursuing an ill-fated hostile for Tribune Publishing, all while Gannett’s core revenue, EBITDA, margins and Free Cash Flow continue to decline."

"With Gannett’s CEO departing by May and its key digital executive leaving later this month, there’s now an even greater leadership void," it continues. "Frankly, the team leading Gannett has not demonstrated that it’s capable of effectively running this enterprise as a public company. 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."

The Hill has reached out to Gannett for comment.

In addition to USA Today, which launched nationwide in 1982, Gannett owns and operates dozens of notable local newspapers, including The Record in New Jersey, the Arizona Republic and the Green Bay Press-Gazette. The Rochester-based company has been in business since 1906.

Digital First Media owns about 200 publications across the country, including the Denver Post, Detroit News and Boston Herald.

The proposed purchase again underscores the challenges newspapers are experiencing, largely due to drops in print advertising and an increasingly over-saturated market in the digital era.

More than half of the largest newspapers in the U.S. have laid off employees since January 2017, according to an analysis released on Monday.

The Pew Research Center found that nine of the 16 newspapers with circulations of 250,000 or more, or 56 percent, had experienced layoffs during a 16-month period ending in April.