By Lukas I. Alpert
Activist investor Carl Icahn fired the first salvo in a
shareholder fight with Gannett Co. on Thursday, pushing for two
seats on the media company's board and changes to its corporate
governance rules ahead of the planned spinoff of its publishing
division from its broadcast business.
The move follows a familiar pattern for Mr. Icahn, closely
mirroring a fight he had with eBay over the coming spinoff of its
PayPal electronic payments company. The two sides reached an
agreement Wednesday, with eBay giving Mr. Icahn a board
representative and agreeing to corporate governance rules that he
sought.
Mr. Icahn has a roughly 6.6% stake in Gannett, which publishes
82 daily U.S. newspapers including USA Today and owns 46 television
stations. In a letter to Chief Executive Gracia Martore, he said he
was dissatisfied with the company's governance profile and accused
it of poor communication.
Mr. Icahn said he was pleased that the company had decided to
split itself into two separate publicly traded entities, but
suggested the new companies would find themselves takeover targets
and worried that their boards would make protective moves that
wouldn't be in the best interest of shareholders.
"If this occurs, the shareholders--the true owners of the
company--should have the full and only right to decide whether or
not to accept the offer," he wrote.
Mr. Icahn said he intended to nominate two candidates to
Gannett's board, former Bertelsmann Entertainment Chief Executive
Michael Dornemann and Icahn employee Courtney Mather. He said he
would also press for corporate governance changes, including
blocking any so-called poison pill provision designed to prevent a
takeover, without majority approval by all the shareholders.
In a statement Thursday, Gannett accused Mr. Icahn of launching
an "overreaching campaign to advance his own agenda."
"We are surprised by Mr. Icahn's aggressive actions, including
his threat to run a proxy contest to force wholesale changes in
Gannett's corporate governance and dictate the corporate governance
of a company whose governance profile has yet to be determined,"
said Gannett Nonexecutive Chairman Marge Magner.
Ms. Martore said the company's board has been a driving force
behind its strategic transformation and plan to separate two
publicly traded companies--"a plan Mr. Icahn publicly supported
following our announcement last summer and continues to support
now."
Mr. Icahn made a similar argument to eBay over PayPal. In the
end eBay's board agreed that shareholders would have to approve a
poison pill defense, and made other changes to prevent roadblocks
to an acquisition.
Mr. Icahn first disclosed his ownership stake in Gannett in
August, just 10 days after the company had announced its plans to
split. In a regulatory filing at the time, Mr. Icahn said he felt
the company was undervalued and he had begun accumulating shares to
force a split, but the company beat him to the punch.
Since the spinoff announcement in August, Gannett shares have
declined 8.6%. They were up 1% in early trading Thursday following
the release of Mr. Icahn's letter. Mr. Icahn said the stock decline
was due to the "company's failure to adequately explain to
investors the capital structure, debt capacity and business
strategy for each of the post-spin companies."
Gannett hasn't announced a date for when it will complete the
split. Gannett will join a host of media companies that have or
will split off print-publishing operations from faster-growing
television and digital operations. Gannett greatly expanded its
broadcast operations with its $1.5 billion acquisition of
broadcaster Belo Corp. late last year, and has continued to bulk up
its digital properties.
David Benoit and Tess Stynes contributed to this article.
Write to Lukas I. Alpert at lukas.alpert@wsj.com
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