Gannett’s board of directors said Monday that it had rejected a $1.36 billion buyout bid from Digital First Media, questioning the would-be buyer’s motives and accusing it of trying to conceal the company’s “inability to finance and complete” the deal.

“After careful review and consideration, conducted in consultation with its financial and legal advisers, the Gannett board concluded that MNG’s unsolicited proposal undervalues Gannett and is not in the best interests of Gannett and its shareholders,” the company said in a news release. “In addition, Gannett does not believe MNG’s proposal is credible.”

Digital First, being re-branded as MNG Enterprises, quickly fired back, saying it had hired a Wall Street investment bank, Moelis & Co., to help finance the deal and was considering nominating new Gannett board members later this week.

“MNG will consider its options in the coming days, including nominating a slate of individuals to the Gannett board who agree that Gannett shareholders should decide for themselves whether to accept our premium cash offer or other alternatives for immediate and certain value,” Digital First said in a statement.

MNG owns approximately 200 publications, including the Denver Post and San Jose Mercury News. Backed by hedge fund Alden Global Capital, the company told Gannett last month it had made a series of “value-destroying” decisions. MNG urged the board to sell the company for $12 per share, about 41 percent more than what the stock was trading for at the time.

Gannett’s board contends it was prepared to discuss the buyout proposal until MNG insisted on Gannett officials signing non-disclosure agreements and refused to explain in writing how it would finance the purchase or address potential anti-trust concerns.

At the heart of the takeover bid are competing views of how best to monetize the newspaper industry as it struggles with declining circulation and other changes. Despite making a series of layoffs Gannett has moved to build on its newspaper brands by growing digital readership.

But MNG, Gannett’s largest active shareholder, with a 7.5 percent stake argues that Gannett’s digital investments have not paid off.

When it has previously taken over newspapers, including the bankrupt Journal Register chain, MNG has dramatically cut staff and sold the newspapers’ offices in some cases, prompting outcries from critics who say the company lays off journalists without regard for newspapers’ roles in their communities.

The deadline for shareholders to nominate new Gannett board members is Thursday.


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