It seems like a return to status quo ante. But the ante may have changed.
No surprises: Monday, Gannett's (NYSE:GCI) shareholders officially rejected Alden Global Capital's amateurish efforts to win board seats and push the country's biggest newspaper chain by revenue to sell itself.
Over the last month-plus, Alden - using the name of its MNG Enterprises, as in MediaNews Group, a moniker it now prefers to its previous Digital First Media - pivoted repeatedly. Seeing its failure on the horizon, it reduced the number of board members it was recommending. Its PR army maintained its fusillade of Gannett-baiting correspondence, which Gannett's own forces answered. (Do remember that PR jobs now outnumber journalism jobs 6:1, that ratio growing annually.) But all of it, as I'd previewed, stank of failure.
But that other scent remains in the air: the sweet aroma of mergers and acquisitions, the coming consolidation of the newspaper industry.
The 2019 Consolidation Games aren't just about Gannett, of course, as we've assiduously covered this year. Borrowing from Paul Simon: "Everybody's buy and sell / And sell and buy / And that's what the whole thing's all about."
This hostile Alden attempt to take over Gannett appears defeated at this moment, as did McClatchy's (NYSEMKT:MNI) bid to takeover Tribune (NASDAQ:TPCO) in late December. Those were whiffs, but the thinking of industry executives remains dominated by the inevitable merging of the big chains.
"This is all going to take some time to sort out," one CEO in the midst of the action told me last night as the results of the Gannett election became clear.
So the question of the day, of course: What now?
Are we back to where we were before, back before Alden's Heath Freeman sniffed fear and disarray in the Gannett leadership ranks as CEO Bob Dickey announced his retirement?
Not really. Alden, despite today's immediate failure, has successfully thrown Gannett into play. While its board rejected Alden's offer of $12 a share - an "offer" never fully backed up by certain financing - expect that a new offer of $13 or even $13.50 a share might well succeed. Pushed by Alden, Gannett retained Goldman Sachs (NYSE:GS), and that opens up to plenty of new M&A potential - more today than yesterday.
Gannett's share price - which first took its big tumble three years ago when its attempt to seize Tribune Publishing flopped - was down to the $8.75 range Monday. The market had recently priced in Alden's expected lack of success; it was at $9.75 the day before Alden's offer in January and spiked to near $12 shortly after it.
So $13 starts seeming pretty good. And given even a $9 share price, a cash-and-stock offer could be successful, with the shares serving as a potential upside.
But one would have to be optimistic for the upside. Take a look at this one-year share price change chart:
Gannett down almost 24 percent, Tribune down 35 percent, McClatchy down 76 percent. "Optimistic" may be the wrong word; "settling" and "getting out" might be better characterizations.
So how soon might Gannett buy, sell, or merge? Perhaps Alden could back with a new bid - though its comments on losing the fight suggest otherwise.
One thing we know is that Gannett is now, after this nasty fight, about to hire its next CEO. Presumably he (and it is expected to be a he) will check two boxes Gannett has wanted to check: (1) a name that the industry will recognize; (2) digital business credibility.
Will that next CEO be next operational leader for a company that badly needs new strategy and better execution? Or will he be Gannett's chief dealmaking officer in the Consolidation Games? Given all the uncertainties, the CEO's golden parachute should be eye-popping - maybe in the ballpark of Tronc's small Air Force.
Throughout the Gannett/Alden war of words, Goldman has been working in the background. Among the prime tasks is valuing what a combined Gannett/Tribune would look like - an exercise the two companies rehearsed last summer, though with no public performance. Quite simply, how much would each company's shareholders get in the deal?
That's the other ante. How much cash will it take to buy one of these companies? Given the industry's dismal trajectory, how much financing can be obtained? Each new valuation must reflect the most recent public financials, plus whatever access these companies' give potential suitors to their data rooms. (Alden found a "closed" sign on Gannett's.)
This month's Q1 reports only reinforce the bloodbath of decline industry-wide. Tribune Sunday announced it was down 8 percent in same-store revenues (after doing some gymnastics with its reported figures). That's losing $1 out of every $12 in one year - a number that parallels its peers and has been remarkably consistent the past two or three years.
And yet: "Adjusted EBITDA increased to $21.3 million, up $12.8 million year-over-year." Operating expenses were down 6.5 percent, and that of course means fewer journalists doing journalism.
Therein lies this larger M&A push: Where else can any of these companies get big (if short-term, think 2 or 3 years) savings to slow their downward spirals?
Print advertising remains down double-digits across the industry, and digital advertising - even if you include "marketing services" - is newly weakened in the face of Google and Facebook's (NASDAQ:FB) 77 percent share of local digital ad revenue. "It's been growing for six years," one top revenue exec told me this week. "This year, it's struggling." Local digital subscription revenue is the one operational area the industry looks to for growth.
As Tribune continues to assess who it wants to sell to, or buy, or merge with - McClatchy continues its search for a partner. And, as I noted a month ago, even GateHouse - the past few years' go-go acquirer, amassing 145 titles - is now reassessing its own strategies. Those plans haven't turned the company around. Will it remain a standalone company (known formally as New Media Investments, Inc.)? Or will it participate in a grand industry rollup that some have prophesied for years?
GateHouse may be more cash poor than in years past. But it is still backed by giant Fortress Investment Group, which was itself bought in 2017 by supergiant SoftBank (OTCPK:SFTBY). The capital is there. Does anyone there see enough profitability in owning one-sixth of all America's daily newspapers - which is what a GateHouse + Gannett marriage would produce?
Mostly, that's a question of sheer investment potential. At what price - given all the somber forecasts for the years ahead - does anyone feel comfortable putting down a bet? Certainly, Alden - able, willing, and apparently eager to ride the print newspaper industry down to its end - will be a buyer at some price. (Word is that its execs were checking out other, smaller potential acquisitions as recently as last week.) But is there anyone else?
If we do see big mergers, who will run the companies that result, with what strategies? And - big question - will they have enough capital to execute on their vision of a digital transformation?
Familiar story. New chapter. All today's news does is turn the page.
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.