Alden Global Capital, one of the most predatory of hedge funds, has been trying since last December to mount a hostile takeover of the Gannett newspaper chain.
Gannett, with over 100 dailies and nearly 1,000 weeklies and 19,000 employees in 43 states, is one of the main surviving newspaper chains.
Legacy chains like Gannett have been laying off workers. They are not exactly the heroes of this story, but they do maintain some residual commitment to journalism. Outfits like Alden, which treat news, shoes, real estate, and workers as just so many objects of financial plays, are far worse.
Last year, a colleague and I wrote about the business model of private equity companies and hedge funds like Alden and its subsidiary Digital First Media. They strip assets from newspapers, sell off real estate, cut staff to the bone, incur debt that they then put on the newspaper’s own balance sheet, and pull out short-term profits.
They take out so much money so fast, much of it from debt, that even if the paper goes broke they still come out way ahead. Alden-owned newspapers have slashed newsroom employment at about twice the rate of other chains.
This time, two unions that represent Gannett workers, the NewsGuild-CWA and the Teamsters, are playing a major role in impeding Alden’s plans. The Guild has contacted Gannett shareholders in advance of the Gannett shareholders’ meeting on May 16, urging them to vote down the Alden proposal.
The Guild also utilized its skills as investigative reporters. Research by the Guild, looking into court filings, SEC records, and bankruptcy documents, found that two companies recently acquired by Alden are being run into the ground. Fred’s Inc., a pharmacy chain, has consistently lost money since Alden acquired a 24 percent stake, according to the Guild. And as controlling owner of Payless, a retail shoe chain, Alden will oversee the company’s second (!) bankruptcy and liquidation with the loss of 16,000 jobs.
The Guild also tracked down the identity of Gannett shareholders. It turns out that the venerable newspaper chain is 59 percent owned by six financial companies, including BlackRock and Vanguard.
You might think that some of these players are first cousins to Alden Capital, looking for quick returns and a hasty exit, especially if Alden offers a price per share that’s above the market price. In fact, some of these companies are seeking a sound investment with predictable returns, not exactly Alden’s strong suit.
Workers in the newspaper business have been ill treated, as owners seek to maintain their own profits in the face of dwindling ads and internet competition. But some owners are a lot worse than others, and Gannett as a legacy chain at least still cares about journalism.
The union fight to defend a free press and decent jobs for journalists is not just about collective bargaining. Good for the Guild and the Teamsters for fighting this takeover. And if the union does save Gannett from the worst of the worst, is it too much to ask of Gannett management to remember that when the next contract negotiations roll around?