MNG/Digital First Media launches proxy fight for seats on USA TODAY owner Gannett's board

A hedge fund-owned newspaper company with its eyes on Gannett Co. is launching a hostile bid to take control of Gannett's board of directors.

MNG Enterprises Inc., also known as Digital First Media, notified Gannett of its plans to nominate six directors to its board, Gannett confirmed in a Thursday press release. 

The move sets the stage for a high-stakes tug of war between the two media companies over control of Gannett, which owns USA TODAY, more than 100 local media brands and digital marketing assets such as ReachLocal and SweetIQ.

Gannett on Monday said its board had unanimously rejected MNG's unsolicited bid to buy the company for $12 per share, saying it was not "credible."

Gannett shareholders will ultimately vote on whether to elect new board members, keep the current slate or choose a mix. Names of nominees were not immediately available.

The Gannett board currently has 10 members. It will be reduced to nine after the company's next stockholder meeting, according to a recent filing with the Securities and Exchange Commission. 

Of hostile campaigns for board seats "that went all the way to a vote” by shareholders since 2001, the companies prevailed about 56 percent of the time, activists won 36 percent of the time and each side won some candidates 8 percent of the time, according to FactSet data analyzed by FTI Consulting in 2015.

In a statement, Gannett said it "will consider whether MNG is nominating these candidates to support its acquisition proposal, which the board has already rejected, and whether MNG’s proposed nominees are committed to acting in the best interests of all of Gannett’s shareholders, or are beholden to MNG."

More:Gannett rejects takeover offer from MNG/Digital First Media

More:Sears saved from liquidation: Judge approves bankruptcy sale to ex-CEO Eddie Lampert

More:Widespread online banking, mobile app outage hits Wells Fargo customers

Digital First, majority owned by New York hedge fund Alden Global Capital, operates daily and weekly publications including the Denver Post and the Boston Herald. 

MNG, which holds a 7.5 percent ownership stake in Gannett, has argued it can do a better job with the business. MNG representatives did not immediately respond to a request seeking comment Thursday

Gannett has said that MNG lacks a clear plan to advance Gannett operations and lacks the clear ability to finance the deal.

Gannett's stock rose 1.4 percent Thursday in after-hours trading to $11.15. It closed at $11 in regular trading.

Digital First has gained a reputation for relentless cost-cutting at its newspapers, but media analysts say it's unlikely the company can slash significant costs to bolster profitability at Gannett, which has gone through significant downsizing in recent years.

Rather, boosting digital advertising and subscriptions is widely viewed as the most viable route to sustainability in the media business.

"The current state of play means the low-hanging fruit has already been picked and the ability to cut your way to success doesn’t exist anymore," said Chuck DelGrande, a Chicago-based managing director in the tech, media and telecommunications group of investment bank Alantra.

The vote on Gannett's board will take place at the company's annual meeting. A date has not been announced.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.