Shares of Gannett (NYSE:GCI) were surging in January after the struggling newspaper publisher received a hostile takeover bid from hedge fund-backed MNG Enterprises, which owns about 200 publications, including The Denver Post and The San Jose Mercury News. MNG offered $12 a share, or $1.36 billion, representing a 41% premium over Gannett's share price at the end of 2018.
As a result, the stock finished the month up 30%, according to data from S&P Global Market Intelligence. As the chart below shows, shares surged on news of the offer but then cooled off, as it wasn't clear if Gannett would agree to sell itself.
Gannett shares jumped 21% on Jan. 14 as the news broke. The biggest U.S. newspaper publisher by daily circulation and the owner of USA Today, Gannett has struggled in recent years like much of the rest of the print media industry. So perhaps it's not surprising to see a takeover play for Gannett, which has its own reputation as an aggressive buyer of local and regional newspapers.
In its proposal to buy Gannett, MNG, which already owns 7.5% of Gannett, argued that the stock had underperformed and requested that Gannett immediately cease making digital acquisitions, review strategic alternatives including a potential sale of the company, and commit to a feasible, strategic plan before naming a new CEO.
MNG, also known as Digital First Media, has a reputation for slashing budgets and laying off staff, causing some to shudder at its proposal. Gannett said it had received the offer and would review it before making a decision.
On Feb. 4, Gannett's board of directors unanimously rejected MNG's proposal, saying the proposal wasn't credible, that it undervalues Gannett, and that it's not in the best interest of Gannett or its shareholders. It also said MNG had not answered its questions regarding its funding for the takeover and its strategic plan.
Gannett's shares fell only 3% when it rejected the bid, a sign that investors may expect a revised offer to go through. Gannett offered to meet with MNG on Feb. 7 in response to its request. Look for Gannett shares to continue to be volatile, as MNG could come back with a counterproposal. If it doesn't, Gannett's course is uncertain, since it's still looking for a new CEO, and it could restart its pursuit of Tribune Co. or another newspaper company.
Check out the latest Gannett earnings call transcript.