Report: Media Group Eyes Acquisition Of Gannett

A hedge-fund-backed media group known for buying up struggling local papers and cutting costs is planning to make an offer for USA Today publisher Gannett Co. GCI 0.52% , according to The Wall Street Journal citing people familiar with the matter.

MNG Enterprises Inc., one of the largest newspaper chains in the country, has quietly built a 7.5% position in Gannett’s stock and plans to publicly urge the McLean, Va., publisher to put itself up for sale, the people said.

MNG, better known as Digital First Media, will also offer to buy Gannett for $12 a share, they said, which would represent a 23% premium over Friday’s closing price of $9.75. The shares, which fell steeply last year, have been rising lately.

Closely held Digital First is known for its contentious history with the newspaper industry in part because of its penchant for slashing costs. It has over the past few years made multiple approaches to Gannett about a deal but has been rebuffed, the people said. At least one approach was made in the past month or so. It isn’t clear whether Gannett will be receptive now.

USAToday reports Gannett CEO Bob Dickey said in an email Sunday night to employees that the company had not had communication regarding a proposal. "The company and board are well advised, and if we have more information we will keep you informed. During this time, it’s business as usual for us and we need to stay focused," Dickey said in the email.

In addition to publishing USA Today, one of the top-selling papers in the country, Gannett owns and operates dozens of other publications such as the Arizona Republic, the Record in North Jersey and the Naples Daily News in Florida. Its shares have tumbled in recent years and dropped roughly 15% in the past 12 months, leaving the company with a market value of about $1.1 billion.

Locations of Gannett newspapers

The print media industry has suffered sharp revenue declines as digital advertising sales fail to keep up with drops in print advertising. This in turn has prompted a wave of consolidation among publishers looking to benefit from economies of scale and cut costs, often through layoffs. Both Gannett and Digital First Media have been active acquirers.

Digital First Media owns about 200 newspapers and publications including the Denver Post and the Orange County Register. Last year it beat out other bidders to buy the Boston Herald after the tabloid had filed for bankruptcy.

This wouldn’t be the first time Digital First Media has faced a fight. Since it bought the Denver Post, the paper’s staff has shrunk, prompting outrage from news-industry unions but helping make Digital First one of the most profitable newspaper operators.