Last Thursday, Gannett (NYSE: GCI) shareholders proclaimed a resounding no to MNG board candidates, electing eight of its own candidates instead. MNG Enterprises, also known as Digital First Media, has been trying to take over Gannett since January when it made an unsolicited bid to buy the media organization for $1.4 billion. Gannett rejected the bid, saying it undervalued Gannett, that MNGs offer was not credible, and it was not in the best interests of its shareholders.
Among other tactics, MNG tried to replace Gannett board members with its own nominees. Initially, MNG nominated six candidates, but later withdrew three, leaving three on the board slate for director elections. Voting by proxy and at Gannetts annual meeting of shareholders on May 16, Gannett named the following to its board: John Jeffry Louis, John E. Cody, Stephen W. Coll, Donald E. Felsinger, Lila Ibrahim, Lawrence S. Kramer, Debra A. Sandler and Chloe R. Sladden.
We are pleased with the preliminary outcome of the vote, and the Gannett board and management team thank our shareholders for their input, participation and support throughout the proxy contest. Consistent with the interactions with our investors leading up to the meeting, this outcome demonstrates that Gannett shareholders recognize the continued progress we have made toward our ongoing digital transformation and agree that our strategic plan is the best path to deliver value for all Gannett shareholders. Our shareholders also understand that the broad and diverse backgrounds, professional experiences and skills of our directors make them uniquely qualified to oversee Gannetts achievement of its strategic objectives and transformation plan, said Gannett in a statement.
Importantly, we also want to recognize all of our dedicated employees for their commitment and hard work throughout this process. We remain focused on executing our strategy to create value for our customers and shareholders by continuing to be a news leader and driving growth in digital subscribers, audience engagement and advertising and marketing services revenues, while upholding the companys commitment to journalistic excellence, Gannett added.
MNG commented on the vote.
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This is a win for an entrenched Gannett Board that has been unwilling to address the current realities of the newspaper business, and sadly a loss for Gannett and its shareholders, said MNG in a news release.
Gannetts newspapers are critical local resources, and we hope that Gannetts incumbent Board and Management shift course to embrace a modern approach to local news that will save newspapers and serve communities. That would be the best outcome. If Gannetts Board does not shift course from overpaying for non-core, aspirational and dilutive digital deals, we believe the stock will drop further, MNG added.
The vote is preliminary until a final count is certified by the independent Inspector of Elections. Gannett will then report the results on Form 8-K to the U.S. Securities and Exchange Commission.
Does this mean that MNG will stop fighting to take over Gannett? That isnt clear, but their statement suggests that they may be walking away from a deal that is not likely to happen without board or shareholder support. Even if that is the case, Gannett has a lot of work to do to reassure shareholders that it has fully embraced a digital-first attitude. The companys first quarter results showed that digital-only subscribers had grown 39% to 538,000, but the company also reported a GAAP net loss of $11.9 million. Even with digital growth, an $11.9 million loss is still a significant obstacle on the road to profitability.