MILWAUKEE (CN) – Shareholders have challenged the latest newspaper merger, a $280 million deal that would sell the Milwaukee Journal Sentinel, the Memphis Commercial Appeal and 12 other dailies to Gannett for $12 a share.
Lead plaintiff Stephen Seifert sued the Journal Media Group, six members of its board, and Gannett, in a class action in Milwaukee County Court.
The Journal Media Group, based in Wisconsin, also publishes the Ventura County Star in California, the Naples Daily News in Florida, the Redding Record-Searchlight in California, the Corpus Christi Caller-Times in Texas, the Knoxville News-Sentinel in Kentucky, and the three-paper group Treasure Coast Newspapers in Florida. It also owns more than two dozen smaller papers, many of them in Wisconsin, altogether serving 14 markets in nine states.
The Journal Media Group is only 7 months old, having been formed in April in a spinoff and merger of E.W. Scripps Co. and Journal Communications.
Seifert says in the Nov. 24 lawsuit that immediately after that spinoff, Gannett and a second, unnamed company (“Party A”) offered to buy out the new news group, but that “only Gannett ever had a shot at (the) deal.”
“Indeed, because of a preexisting relationship and the temptation of post-close opportunities, Journal Media’s Board and management wrongly favored Gannett throughout the process, at first rebuffing Party A and then all but ignoring it. As such, the acquisition is the result of a biased process and is unfair to Journal Media’s shareholders,” the complaint states.
Seifert also challenges the “generous severance packages for Journal Media executives in the event of a merger or acquisition,” which he says “incentivized management to pursue the acquisition regardless of whether it was in the best interests of the company and its shareholders, thus creating a conflict of interest.”
He seeks class certification, wants the deal put on hold or rescinded, an accounting, and damages for breach of fiduciary duty and aiding and abetting breach of fiduciary duty.
He is represented by John Blythin with Ademi & O’Reilly, of Cudahy, Wisc.
For years, business analysts have been saying the newspaper industry is in “the dying phase of its life cycle,” having lost its once-lucrative classified ad section to Internet advertising, and much of its news value to round-the-clock reporting on cable news channels and the Internet.
Cablevision prepared an offer this spring to buy the New York Daily News for $1 – not $1 a share, a single dollar – but decided against it after analysts told it that it would lose money on the deal, according to industry reports at the time.
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