MNG Enterprises Proposes to Acquire Gannett for $12.00 Per Share in Cash

Proposal Represents Substantial 41% Cash Premium to Gannett’s 2018
Year-End Closing Price

Requests that Gannett Immediately Enter into Discussions with MNG
about a Strategic Combination

Calls for Gannett to Commence Review of Strategic Alternatives to
Maximize Value for all Gannett Stockholders

Calls for Gannett to Commit to Moratorium on Digital Investments

MNG’s 7.5% Ownership Stake in Gannett Makes It Gannett’s Largest
Active Stockholder

DENVER–(BUSINESS WIRE)–MNG Enterprises, Inc. (“MNG”), owner and operator of one of the largest
newspaper businesses in the U.S., with approximately 200 publications,
today announced that its board of directors has sent a letter proposing
to acquire Gannett Co., Inc. (NYSE:GCI) (“Gannett” or “the “Company”)
for $12.00 per share in cash. The proposed transaction would represent a
cash premium of 41% to the Gannett stock price as of December 31, 2018,
and MNG has asked Gannett to enter into discussions with MNG immediately
about a strategic combination. MNG also requested that Gannett
immediately commence a review of strategic alternatives to maximize
shareholder value, commit to a moratorium on the acquisition of any
additional digital assets, and commit to a feasible, strategic and
financial path forward before hiring a new CEO.


In the letter, MNG notes that the team leading Gannett has not
demonstrated that it is capable of effectively running it as a public
company, with the stock having lost 41% of its value since its debut as
a public company two and a half years ago. MNG also notes in the letter
that its interest in Gannett is a reaffirmation of its commitment to the
newspaper industry and its desire to grow its newspaper business over
the long term.

The full text of the letter that was sent to Gannett’s Board of
Directors on January 14, 2019 follows below:

January 14, 2019

Gannett Co., Inc.
7950 Jones Branch Drive
McLean, Virginia
22107
Attn: John Jeffry Louis III, Chairman of the Board of
Directors

To the Board of Directors:

MNG Enterprises, Inc. (“MNG” or “we”), through its managed investment
account, has a 7.5% ownership stake in Gannett Co., Inc. (“Gannett” or
the “Company”), making it the Company’s largest active stockholder. We
also are one of the leading Newspaper operators in the U.S., with
approximately 200 publications including The Denver Post, The San Jose
Mercury News, The Orange County Register and The Boston Herald. Because
we know how to consolidate and operate successful newspaper businesses
over the long term, we have approached members of your Board and
management on multiple occasions about a potential strategic
combination. Despite our overtures, Gannett has not meaningfully engaged
with us.

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.
[i] 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. 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. We believe Gannett shareholders deserve better.

Accordingly, MNG proposes to purchase Gannett for $12.00 per share,
representing a substantial cash premium, and requests the Board immediately
take the following actions to maximize value for stockholders:

  • Enter into discussions with MNG about a strategic combination;
  • Hire an investment bank to conduct a review of strategic
    alternatives, including a potential sale of the Company;
  • Commit to a moratorium on digital acquisitions; and
  • Commit to a feasible, strategic and financial path forward before
    hiring a new CEO.

MNG’s proposal to buy Gannett for $12.00 per
share in cash, represents a 41% premium to where the stock closed at YE
2018.
[i] Such an acquisition, subject to
confirmatory due diligence, would provide a substantial premium over
Gannett’s $8.53 closing price on December 31, 2018 and its closing price
of $9.75 on January 11, 2019, and would provide compelling and immediate
cash value for stockholders. Further, unlike other potential buyers, as
a proven operator in the newspaper business, we are able to provide a
home for the Company’s businesses and valued employees so they can
continue to serve their local communities. We do not believe that any
material regulatory issues would stand in the way of completing this
transaction.

MNG has invested in Gannett because we see significant value in
Gannett’s assets, particularly its core newspaper business. However,
Gannett has been moving in the wrong direction, resulting in a declining
stock price and lack of confidence that the Board and existing
management are willing and able to take the steps necessary to turn the
Company around. Based on our industry experience, we believe that it
will be very difficult for Gannett to address its operational and
strategic issues as a public company, and that a sale of the Company
presents the best path forward for Gannett stockholders, employees,
business partners and customers.

We are keenly interested in working constructively with the Board,
with the goal of getting to a successful transaction with value, speed
and certainty
. We ask that the Board promptly contact us to arrange
an opportunity to discuss our proposal to purchase the Company. We are
not asking for exclusivity, and believe that running a sale process open
to other serious bidders would be in the best interests of all
stockholders. We believe that our substantial “skin in the game” as a
major stockholder, as well as our extensive operational experience and
successful track record in the newspaper industry, enabling us to
provide a home for the Company’s businesses and valued employees so they
can continue to serve their local communities, should make our proposal
particularly compelling. Our interest in Gannett is a reaffirmation
of MNG’s commitment to the newspaper industry and our desire to grow in
the newspaper business over the long term.

Who We Are

MNG runs one of the largest newspaper businesses in the U.S. by
circulation with approximately 200 publications including The Denver
Post, The San Jose Mercury News, The Orange County Register and The
Boston Herald. We are experienced newspaper operators with a
successful track record of acquiring newspaper businesses and running
them in a profitable and sustainable way
.

Seasoned Newspaper Operators: This is a team of veteran and
seasoned Newspaper Executives that believe in what we are doing. Our top
4 Executives have a total of 128 years in the business, and an average
of 32 years each. Our goals are simple: to run profitable newspapers so
they will be around to serve their local communities well into the
future.

Leading Industry Consolidator and Operator: MNG employs a
continued focus on consolidation of operations (real estate, printing,
shared services, IT, finance and administration), zero based budgeting
and rationalization of labor costs. A consolidation strategy works when
the consolidator is a best in class operator and brings the most value
to its targets. With one of the best in class margins and a strong
unlevered balance sheet, we are one of the leading industry
consolidators who are able to make acquisitions of newspapers on our
platform successful today and well into the future. We also recognize
the importance of our valued employees to our success, and compensate
our newspaper operators well and incentivize them to thoughtfully
maintain and grow EBITDA the best way they know how, even in this
challenging environment of secular decline.

In stark contrast to Gannett’s declining EBITDA margins as shown in
Chart A, Chart B and Chart C, we have increased EBITDA margins for each
of the last 4 years, and have a consolidated EBITDA margin near the top
of the industry.

We Save Newspapers: When other people won’t step up, we do. We
save newspapers and position them for a strong and profitable future so
they can weather the secular decline.

Take our last two acquisitions – The Orange County Register and The
Boston Herald. Both papers were left for dead and put into bankruptcy by
their former owners, which could have caused a liquidation and a loss of
all the jobs. MNG stepped up and invested in them when others wouldn’t,
saving many of those jobs and providing for new jobs. We improved
operations and made them viable and profitable by providing them with
new leadership, a seasoned executive team and a new strategy when others
clearly had failed.

Gannett is Moving in the Wrong Direction

Gannett has not been successful as a public company investment. The
Company’s stock price has declined 41% from approximately $14.37 to
$8.53 since its spin-off from TEGNA Inc. (NYSE: TGNA) in 2015.

[i]
As shown in Table A, the Company has
trailed its media peers, proxy peer group, and the S&P 500 index since
its spin-off, underperforming the S&P 500 index by a staggering 67% over
the past three years.

Approximately 90% of Gannett’s Revenue and EBITDA is from publishing. [ii] A lack of focus on managing the core business and poor capital
allocation have resulted in the business experiencing a severe decline,
with Adjusted EBITDA dropping by 31% from $472mm in 2014 to a projected
$328mm for 2018, and Free Cash Flow down close to a staggering 50% from
$274mm in 2014 to $145mm on a trailing twelve month basis. [iii]
We believe that Gannett’s newspaper business could be improved and made
more profitable by optimizing the Company’s cost structure and showing
discipline in capital allocation with a goal of optimizing EBITDA and
Free Cash Flow per share every year. However, instead of focusing on its
core newspaper business and acting as the industry consolidator pitched
to investors at the time of the spin-off, the Company has spent
approximately $350mm on digital acquisitions since 2015. [iv]
That $350mm equates to over $3.00 per share, or 36% of Gannett’s entire
market capitalization. [i]

Despite the Company’s poor stock and operating performance since the
spin-off, the Company seems to be doubling down on its current strategy.
As we have heard from senior leadership, and as reported in the news
media, the Board appears to be looking for a new CEO with a digital
rather than newspaper background.

As Gannett’s largest active stockholder, with insight and expertise
in the Company’s core newspaper business, we ask the Board to shift its
focus away from questionable digital acquisitions and finding a new CEO
to pursue them, and toward consideration of strategic alternatives.

It is imperative to act with urgency, as the Company is on its way to
putting Gannett’s stockholders, valued employees, and the local
communities they serve in jeopardy.

The Best Path Forward for Gannett – A Sale of
the Company

The Company is at a critical juncture. Its core newspaper business is in
decline. President and CEO Robert J. Dickey will step down by May 2019
and Sharon Rowlands, the CEO of ReachLocal, Inc., is leaving later this
month, each of them a key figure in the Company’s current strategy. The
$350mm in digital acquisitions have not yielded positive results in our
view, with the Company experiencing an extended period of stock price
declines, poor operating performance, and a substantial deterioration in
EBITDA, EBITDA margins, Free Cash Flow and free cash flow per share,
destroying more than $650mm of shareholder value. [i] Gannett
now trades at a meaningful discount relative to peers.

This has taken place while the Board has been driving the questionable
digital acquisition strategy (in part by compensating senior officers
based on contributions to the Company’s strategic plan, including its
acquisition strategy), the Company’s corporate expenses and executive
compensation have been consistently increasing, and director stock
ownership has been minimal, undermining investor confidence that the
Board’s interests are aligned with stockholders.

We believe that a sale of the Company presents the best path forward to
maximize value for Gannett stockholders, rather than attempting in full
view of the public markets to address its operational issues, find new
leadership to pursue its unsuccessful strategic transformation and
regain the trust of a skeptical investment community.

To reiterate, we believe that the Board should immediately take the
following actions:

  • Enter into discussions with MNG about a strategic combination;
  • Hire an investment bank to conduct a review of strategic alternatives,
    including a potential sale of the Company;
  • Commit to a moratorium on digital acquisitions; and
  • Commit to a feasible, strategic and financial path forward before
    hiring a new CEO.

We request that the Board promptly contact us to arrange an opportunity
to discuss our proposal to purchase the Company. If the Board refuses to
engage with us in good faith and in a timely fashion, we reserve our
rights to take action to protect the value of our investment, which may
include seeking changes to the composition of the Board. Put plainly,
MNG is committed to maximizing value for all Gannett shareholders and
growing our newspaper business over the long term.

We hope that the Board will work with us to maximize value for all
Gannett stockholders, and we look forward to receiving a response in an
expeditious manner.

Sincerely,

/s/ R. Joseph Fuchs
On behalf of the Board of Directors, MNG
Enterprises, Inc.
Chairman, R. Joseph Fuchs

Endnotes:
[i] Based on closing price as of December 31, 2018.

[ii] Gannett’s Publishing segment Adjusted EBITDA contribution to the
Consolidated Entity is measured after allocation of Gannett’s Corporate
and Other segment Adjusted Expenses on the basis of the segment’s
revenue contribution; Data for the trailing twelve months as of
September 30, 2018.

[iii] Gannett’s Consolidated Adjusted EBITDA of $472mm in 2014 as
disclosed in Company filings and $328mm as the midpoint of the outlook
range for 2018 Adjusted EBITDA as included in earnings release on
November 8, 2018; Gannett’s Free Cash Flow of $247mm in 2014 as
disclosed in 2015 10-K and $145mm on a trailing twelve month basis
calculated from Company filings.

[iv] Gannett’s acquisition of ReachLocal for $162.5mm and SweetIQ for
$31.8mm as disclosed in the Company’s 2017 10-K; Gannett paid
approximately $145mm in cash to WordStream’s equity holders as disclosed
on July 2, 2018; Further consideration to WordStream included up to an
additional $20mm in potential cash earn-out payments based on WordStream
meeting certain revenue targets and up to $6.4mm in cash payable upon
the release of the escrow and expense holdbacks.

About MNG Enterprises

MNG Enterprises, Inc. is one of the largest owners and operators of
newspapers in the United States by circulation, with approximately 200
publications including The Denver Post, The San Jose Mercury News, The
Orange County Register and The Boston Herald. MNG is a leader in local,
multi-platform news and information, distinguished by its award-winning
original content and high quality, diversified portfolio of both print
and local news and information web sites and mobile apps offering rich
multimedia experiences across the nation. For more information, please
visit www.digitalfirstmedia.com.

Contacts

Reevemark
Paul Caminiti / Hugh Burns / Renée Soto
+1
212.433.4600
MNGInquiries@reevemark.com

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