The battle for ownership of Gannett is heating up. Last week, MNG Enterprises, also known as Digital First Media, announced that it has secured a letter from investment firm Oaktree Capital Group that states Digital First Media should be able to fund an acquisition for at least $1.725 billion. At this level of investment, Digital First Media could pay Gannett $12 per share, including any associated costs and the refinancing of MNG and Gannett debt.

MNG Enterprises board chair R. Joseph Fuchs spoke about the letter in a March 20 news release.

“Oaktree is a knowledgeable investor with experience in the newspaper publishing industry, and we are pleased they have confidence in our ability to attain debt financing to acquire Gannett on these terms,” Fuchs said. “MNG is a profitable newspaper operator with a strong, unlevered balance sheet. The combined company’s leverage profile would be conservative relative to industry comparables.”

“It’s time for Gannett’s board of directors to stop blocking value creation opportunities for its shareholders and engage with MNG…We are prepared to move quickly and believe if granted the ability to conduct confirmatory due diligence, we can complete our work and finalize a financing package within weeks,” said Fuchs.

Gannett, who rejected MNG’s unsolicited offer earlier this year, is not convinced.

“The letter that MNG Enterprises has procured from Oaktree’s distressed debt fund, Oaktree Strategic Credit, more than two months after MNG launched its unsolicited proposal, does not represent a contractual commitment or a legal obligation, and is highly conditional,” said Gannett in a response. “Furthermore, Oaktree Strategic Credit did not indicate that it was confident in its own ability to arrange committed financing or otherwise suggest it would even play a role in the financing, as would be customary in a letter of this kind.”

In its response, Gannett also said that the company’s board is confident that they will continue to provide value by executing its current strategy which includes a digital transformation.

“Gannett is well positioned to grow the company and its valuable assets to the benefit of Gannett shareholders and the communities we serve,” Gannett said.

They also said that, as a public company, their board would entertain any “bona fide, credible proposal” that values the company appropriately and is capable of following through on that proposal.

This latest move by Digital First Media comes about six weeks after Gannett rejected Digital First Media’s initial offer of $1.4 billion. At that time, Gannett said Digital First Media’s offer was not credible, that they had undervalued the company, and the proposal was not in the best interests of the company or its shareholders.

Founded in 1906, Gannett owns companies in the United States, in the U.K. and Guam, including 109 local media organizations in 4 states and Guam and 160 local news brands online in the U.K. Its brands include USA TODAY, Detroit Free Press, Des Moines Register, IndyStar, Cincinnati.com, El Paso Times, ReachLocal, SweetIQ and WordStream. USA TODAY alone has 125 million unique monthly visitors, and an additional 6 million readers of its local newspapers each weekday.

MNG Enterprises, the owner of Digital First Media, owns approximately 200 publications including The Denver Post, The Boston Herald, the St. Paul Pioneer Press, The Trentonian, The Mercury News and The Orange County Register. Digital First currently owns about 7.5 percent of Gannett stock, which has dropped to $10.49 as of 10:24 a.m. EDT yesterday.

Insider Take:

This isn’t over. Digital First Media and Gannett will continue to duke it out, until one of them wins. Gannett seems to be holding its ground, but with its stock price dropping, it may not be able to hold out. We think Gannett’s real concern is that Digital First has a habit of acquiring newspapers like The Denver Post and then decimating staff to cut costs. As a company, this is certainly their right to do so, but it leaves big gaps in media coverage and isn’t always best for the communities they serve.