Gannett Files Investor Presentation

Highlights Gannett‘s Digital Transformation to Drive Growth and
Shareholder Value, Overseen by Highly Experienced and Fully Independent
Board of Directors

Details MNG’s Self-Serving Attempt to Control Gannett and Reiterates
that MNG’s Unsolicited Proposal Undervalues Gannett and Is Not Credible

Underscores Significant Concerns with MNG’s Highly Conflicted
Candidates, as well as MNG’s and Alden’s History of Diverting Assets and
Destroying Value

Urges Gannett Shareholders to Vote “FOR ALL” of the Company’s
Actively Engaged, Independent Director Nominees on the WHITE Proxy Card

MCLEAN, Va.–(BUSINESS WIRE)–Gannett Co., Inc. (NYSE: GCI) today announced that it filed an investor
presentation with the U.S. Securities and Exchange Commission (“SEC”) in
connection with its 2019 annual meeting of shareholders to be held on
May 16, 2019.

The investor presentation and other materials regarding the board of
directors’ recommendations for the annual meeting are available on the
investor relations page of Gannett’s website at https://investors.gannett.com.

Highlights of the presentation include:

Gannett has a detailed strategic plan to position the company for the
digital future and create significant shareholder value

  • Leveraging nationwide scale and local presence to expand and deepen
    relationships with consumers and businesses
  • Accelerating digital revenue growth through innovative consumer
    experiences and new marketing solutions for businesses
  • Maximizing the value of the company’s legacy print business and
    rationalizing its cost base
  • Pursuing accretive growth through disciplined, selective acquisitions
    that provide synergies

Gannett is executing its strategic transformation and making
substantial progress

  • Launched and grew the USA TODAY NETWORK, the largest local-to-national
    news organization in the country, now with 109 local markets
    integrated with the company’s national premium brand
  • Grew digital audience and engagement within the USA TODAY NETWORK,
    finishing 2018 with more than 500,000 paid digital-only subscribers
    and ranking #1 in mobile web unique visitors in the News and
    Information category1
  • Built a best-in-class digital marketing solutions business with the
    acquisitions of ReachLocal, SweetIQ and WordStream, and the launch of
    LOCALiQ, a data-driven marketing solutions brand
  • Carefully managed the company’s cost base to maintain profitability
    despite industry challenges, reducing annual operating expenses by
    more than $820 million since 20152 (including consolidating
    13 production facilities), while maintaining a commitment to the
    highest journalistic standards and continuing to produce Pulitzer
    Prize-winning content

Gannett’s strategy is delivering financial results

  • Gannett has had stable margins and positive cash flow generation while
    transitioning to a digitally-led product and revenue model

    • Achieved advertising and marketing services revenues of $1.7
      billion in 2018, with $781 million of digital advertising and
      marketing services revenues
    • Strong digital contribution – as of year-end 2018, 36% of total
      revenue and 47% of advertising revenue was digital, up from 26%
      and 29%, respectively, in 2016
    • Profitability is in line with industry peer group3
  • The company’s digital marketing solutions business is a growth engine
    and has demonstrated its potential as a meaningful contributor to
    profitability

    • ReachLocal adjusted EBITDA margins increased to 12% in 2018,
      resulting in double-digit adjusted EBITDA margins being achieved
      several quarters ahead of expectations4
  • The company’s strong balance sheet, with a net debt to 2018 EBITDA
    ratio of 0.8x,5 well below its peer median, is providing
    the financial flexibility to continue executing its digital
    transformation
  • Gannett has maintained a clear, consistent and balanced approach to
    capital allocation, focused on returning capital to shareholders and
    investing in Gannett’s future
  • Since becoming an independent company in mid-2015, Gannett has
    returned $324 million to shareholders via dividends and share
    repurchases – delivering a higher and more stable total shareholder
    return than the majority of its peers, and the highest total capital
    return of any of its peers when measured as a percent of enterprise
    value
  • Gannett’s detailed strategic plan is expected to result in greater
    than 60% of revenues coming from digital by 2023, driven by a deeper
    penetration of Gannett’s local client base with its digital marketing
    solutions, and 1.5 million paid digital-only subscribers by 2023.
    Revenues should stabilize over the 5-year period, which, combined with
    stable to increasing margins, is expected to result in significant
    shareholder value creation

Gannett’s board and leadership possess the experience, skills and
vision to drive value creation

  • Gannett’s director nominees are fully independent and have experience
    and expertise in areas that are critical to Gannett’s operations and
    digital transformation, including finance, business development and
    strategic planning, M&A, digital media, journalism, marketing and
    advertising, technology and human resources
  • Gannett has best-in-class corporate governance policies and practices,
    ensuring effective oversight and accountability to shareholders
  • Executive compensation is aligned with the execution of the company’s
    transformation strategy and shareholder value creation, with
    incentives that are heavily weighted on the delivery of financial
    results (with a significant portion at risk) and include specific
    digital goals
  • Gannett has an experienced leadership team with a complementary mix of
    institutional knowledge as well as outside perspectives

MNG and its majority shareholder Alden Global Capital are pursuing a
self-serving agenda to take control of Gannett via a misguided
two-pronged approach

MNG’s unsolicited proposal is NOT REAL

  • Despite having longstanding business relationships with Gannett, MNG
    did not seek to engage with Gannett prior to leaking and then publicly
    disclosing its unsolicited proposal in January 2019
  • 2 days after receiving MNG’s proposal, Gannett invited MNG to meet
    with Gannett’s management and 2 independent directors, but MNG
    declined multiple meeting dates and refused to otherwise respond to
    Gannett’s questions about how it would finance the transaction it had
    proposed and address other closing risks. MNG only accepted Gannett’s
    invitation to meet after Gannett’s board rejected MNG’s proposal on
    the grounds that it is not credible and undervalues Gannett
  • During a meeting on February 7, well over 3 weeks after MNG announced
    its proposal, MNG admitted that it had not yet reached out to any
    financing sources and was dismissive of Gannett’s other questions
    about the viability of its proposal
  • Now, more than 3 months after submitting its unsolicited proposal, MNG
    has still not secured financing

    • MNG acknowledges that it doesn’t have a financing commitment, and
      argues that it needs to enter into an NDA in order to get one;
      however, this is simply not true
    • Gannett’s financial information is publicly available, and
      committed financing is often obtained based upon such information
    • The real issue preventing MNG from obtaining financing is that the
      pro forma gross leverage of the combined company would be more
      than 4.0x 2018 EBITDA (or more than 4.5x 2018 EBITDA including
      pensions)6 – a leverage level that approaches Gannett’s
      distressed peers
    • The Oaktree letter that MNG has been touting (but has not released
      publicly) amounts to nothing more than an assertion from Oaktree
      that hypothetically, “a debt financing package can be arranged” –
      But that assessment is not realistic
    • Oaktree does not suggest in the letter that it would even
      participate in the financing, and indeed the amount needed to
      finance the transaction far exceeds any amount that Oaktree’s
      distressed debt fund could reasonably be expected to provide itself
    • The fact that after more than 3 months, MNG can still present
      nothing credible on financing validates Gannett’s concerns; MNG’s
      proposal is simply not actionable
  • In addition, MNG has continued to gloss over basic critical questions
    regarding its proposal

    • MNG has yet to address the impact of potential antitrust issues
    • MNG has still proposed no pathway for resolving pension-related
      risks
  • MNG gives conflicting messages about its ultimate goal – does it want
    to be a buyer or a seller? It touts its $12 proposal, but hasn’t
    launched a tender offer and references conducting a “strategic review”
    if its nominees are elected. Does MNG prefer that someone else buy
    Gannett? Is the “review” just a ploy to force Gannett to acquire MNG?

All of MNG’s nominees have irreconcilable conflicts of interest

  • All 6 of MNG’s board nominees are highly conflicted given their close
    ties to MNG and Alden

    • All of MNG’s nominees link back to Health Freeman, president and
      founding member of Alden Global Capital
    • 3 nominees are directors or officers of MNG, a direct competitor
      to Gannett
    • 4 nominees serve on the board of Fred’s, Inc., where Alden is the
      controlling shareholder
    • 4 nominees have other longstanding business and/or personal
      relationships with each other and/or with Alden co-founder Randall
      Smith
  • MNG’s nominees would not bring additive skills or experience to the
    Gannett board and would reduce the quality of Gannett’s board in terms
    of diversity, skills and experience

MNG and Alden have a record of diverting assets and destroying
value

  • At Fred’s, where 4 of MNG’s nominees currently serve as directors, the
    share price has decreased 92%7 since Alden acquired a
    significant stake in December 2016, representing the destruction of
    approximately $360 million of shareholder value, despite operating in
    a steadily growing market8
  • Another Alden portfolio company, Payless ShoeSource, has filed for
    bankruptcy twice in 2 years, and now plans to close all of its more
    than 2,000 stores in the U.S.
  • Recent litigation between MNG and its largest minority shareholder,
    Solus Asset Management LP, demonstrates that MNG has siphoned value to
    Alden, while crippling its newspapers through value-destructive actions

    • According to the lawsuit, MNG has diverted hundreds of millions of
      dollars from its newspapers into Alden ventures that have no
      connection to its media business9
    • In its response, MNG admitted to making a number of investments
      with diverted assets, including investing $248.5 million of
      workers’ pension funds in funds controlled by Alden and investing
      $158 million for a 24.8% stake in Fred’s, Alden’s largest single
      holding10
  • According to recent reports, Alden is also currently being
    investigated by the U.S. Department of Labor for the management of its
    pensions11

Electing MNG’s nominees would jeopardize the value of
shareholders’ investment by transferring control of Gannett to MNG and
Alden without any guaranteed compensation, let alone a control premium

  • Gannett believes MNG cannot complete the transaction it proposed, and
    would not pursue the transaction if it gained control of the Gannett
    board
  • Indeed, MNG’s proxy fight is a way of taking control of Gannett
    without having to pay shareholders anything…ever
  • MNG’s investor presentation indicates that if MNG were to gain board
    control, MNG would initiate a “strategic review,” the outcome of which
    is entirely uncertain
  • MNG and its conflicted nominees have no clear strategy for operating
    Gannett during this review

    • MNG’s disclosed operating plan shows only that it will seek to
      extract cash from Gannett’s assets and increase short-term cash
      flows with actions that will likely destroy Gannett’s long-term
      value potential
    • Given MNG’s and Alden’s record, and the irreconcilable conflicts
      of interest of MNG’s nominees, how can shareholders trust that MNG
      won’t pursue self-dealings with Alden rather than invest in the
      business? How can shareholders trust that Gannett won’t become the
      next Fred’s or the next Payless?

The Gannett board of directors unanimously recommends that shareholders
vote “FOR ALL” of the company’s highly qualified, fully independent
director nominees on the WHITE proxy card today.

The Gannett Annual Meeting of Shareholders is scheduled to be held at
8:30 a.m. ET on May 16, 2019, and shareholders of record as of the close
of business on March 18, 2019 will be entitled to vote at the Annual
Meeting. Gannett shareholders who have questions or would like
additional information should contact the company’s proxy solicitor,
Innisfree M&A Incorporated, toll-free at 1-877-456-3507.

Greenhill & Co., LLC and Goldman Sachs & Co. LLC are acting as financial
advisors and Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal
advisor to Gannett.

 

If you have any questions, or need assistance in voting

your shares, please call the firm assisting us

in the solicitation of proxies:

 

INNISFREE M&A INCORPORATED

TOLL-FREE at 1-877-456-3507

 

Remember: Please simply discard any Blue proxy card you may
receive from MNG.
Any vote on MNG’s Blue proxy card (even a
vote in protest on their nominees) will
revoke any earlier
proxy card that you have submitted to Gannett.

 

About Gannett

Gannett Co., Inc. (NYSE: GCI) is an innovative, digitally focused
media and marketing solutions company committed to strengthening
communities across our network. With an unmatched local-to-national
reach, Gannett touches the lives of more than 125 million people monthly
with our Pulitzer-Prize winning content, consumer experiences and
benefits, and advertiser products and services. Gannett brands include
USA TODAY NETWORK with the iconic USA TODAY and more than 100 local
media brands, digital marketing services companies ReachLocal,
WordStream and SweetIQ, and U.K. media company Newsquest. To connect
with us, visit www.gannett.com.

Forward-Looking Statements

This communication contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include all statements that are not
historical facts. The words “believe,” “expect,” “estimate,” “could,”
“should,” “intend,” “may,” “plan,” “seek,” “anticipate,” “project” and
similar expressions, among others, generally identify forward-looking
statements, which speak only as of the date the statements were made and
are not guarantees of future performance. Where, in any forward-looking
statement, an expectation or belief as to future results or events is
expressed, such expectation or belief is based on the current plans and
expectations of our management and expressed in good faith and believed
to have a reasonable basis, but there can be no assurance that the
expectation or belief will result or be achieved or accomplished.
Whether or not any such forward-looking statements are in fact achieved
will depend on future events, some of which are beyond our control. The
matters discussed in these forward-looking statements are subject to a
number of risks, trends, uncertainties and other factors that could
cause actual results or events to differ materially from those
projected, anticipated or implied in the forward-looking statements,
including the matters described under the heading “Risk Factors” and
Management’s Discussion and Analysis of Financial Condition and Results
of Operations” in the company’s annual report on Form 10-K for fiscal
year 2018 and in the company’s other SEC filings.

 

Appendix A – Non-GAAP Financial Measures

 

Consolidated

       
($ in MM) Fiscal Year
2018     2017     2016
Net income (GAAP basis) $15     $7     $53
Provision for income taxes 15 34 14
Interest expense 25 17 13
Other non-operating items, net       (26)     10     10
Operating income (loss) (GAAP basis)       $29     $68     $89
Depreciation and amortization 158 192 133
Restructuring costs 68 44 46
Asset impairment charges 50 47 56
Acquisition-related items 8 5 33
Other items       9     4     3
Adjusted EBITDA (non-GAAP basis)       $322     $360     $360
 
 

ReachLocal Segment

 
($ in MM)     Fiscal Year
        2018     2017     2016
Operating income (loss) (GAAP basis)       ($1)     ($19)     ($19)
Depreciation and amortization 42     34     12
Restructuring costs 5 1 1
Asset impairment charges 0 0 0
Acquisition-related items 0 0 0
Other items       1     1     0
Adjusted EBITDA (non-GAAP basis)       $48     $17     ($6)
 
 
_____________________

1 Source: comScore.
2 Based on pro forma
financials for the fiscal year ended December 27, 2015, filed with
Gannett’s Form 8-K on October 21, 2016. The pro forma financial
statements give effect to Gannett’s acquisitions of Journal Media Group,
Inc. (acquired on April 8, 2016), North Jersey Media Group, Inc.
(acquired on July 6, 2016) and ReachLocal (acquired on August 9, 2016).
3
Peers include The New York Times Company, New Media Investment Group
Inc., Tribune Publishing Company, News Corporation, McClatchy and Lee
Enterprises, Incorporated.
4 Adjusted EBITDA is a
non-GAAP measure. See Appendix A for a reconciliation of adjusted EBITDA
to Operating Income.
5 Adjusted EBITDA includes
stock-based compensation and is a non-GAAP measure. See Appendix A for a
reconciliation of adjusted EBITDA to Operating Income.
6 Represents
Gannett’s estimates of pro forma leverage levels. Source: Market data,
latest publicly available financial statements, Wall Street Research and
IBES estimates as of 03/11/19. Assumes MNG financeable 2018 EBITDA
contribution of $100 million. Leverage ratio including pensions is based
on post-tax unfunded pension liabilities.
7 Based on
Fred’s closing stock prices on April 18, 2019, and December 21, 2016
(the day prior to the filing of Alden’s initial 13D).
8
Shareholder value lost is estimated as the beginning share count
multiplied by the change in share price over the period. Undisturbed
price of $11.15 is used as the beginning share price for the
calculation. Market growth source: Euromonitor. Statement based on 13-18
CAGR of 3%. CAGR represents growth in market size (measured by retail
value RSP excluding sales tax) for drugstores/parapharmacies in the U.S.
9Sola
Ltd and Ultra Master Ltd v. MNG Enterprises, DE Court of Chancery Case
No. 2018-0134-JRS, March 5, 2018.
10Sola Ltd and Ultra
Master Ltd v. MNG Enterprises, DE Court of Chancery Case No.
2018-0134-JRS, March 19, 2018.
11 Jonathan O’Connell.
The hedge fund trying to buy Gannett faces federal probe after
investing newspaper workers’ pensions in its own funds.” The
Washington Post,
April 11, 2019.

Contacts

For investor inquiries:
Stacy Cunningham
Vice
President, Financial Planning & Investor Relations
703-854-3168
investors@gannett.com

Arthur
Crozier / Jennifer Shotwell / Larry Miller
Innisfree M&A
Incorporated
(212) 750-5833

For media inquiries:
Amber
Allman
Vice President, Corporate Events & Communications
703-854-5358
aallman@gannett.com

Ed
Trissel / Nick Lamplough / Tim Ragones
Joele Frank, Wilkinson
Brimmer Katcher
(212) 355-4449

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