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Carl Icahn

Icahn seeks 2 Gannett board seats in potential proxy fight

Gary Strauss
USA TODAY

Activist investor Carl Icahn said he will seek two seats on Gannett's board of directors, threatening a proxy fight for more influence over the media company's plan to spin off its publishing division from its TV stations and digital assets this summer.

Billionaire investor Carl Icahn says there's a "fundamental misunderstanding" about the future prospects of Gannett's publishing business.

An Icahn-led investment group amassed a 6.6% stake in Gannett (GCI) ahead of the company's Aug. 5 announcement that it would spin off its publishing arm, which includes USA TODAY, from its TV and digital properties, including cars.com, into two separate, publicly traded companies. The transaction is expected to be completed by mid-year.

In a statement, Gannett said it is continuing to pursue its plans.

News of the spinoff and subsequent word of Icahn's stake propelled Gannett up to $35.70 by mid-August. With Thursday's $32.06 close, the stock has since fallen about 10%.

Icahn, whose exploits against scores of corporate boards and CEOs to boost stock prices are legendary, said in a Jan. 21 e-mail to Gannett CEO Gracia Martore that he was "very pleased" when the spinoff was announced. But with the stock price down and his concerns that Gannett's board will make decisions that could "prevent stockholders of both companies from realizing the highest value for their shares,'' he's now threatening a proxy fight.

Icahn added that he wouldn't be surprised if either separately traded company became takeover targets.

"I have no doubt that the currently combined Gannett, and both the stand-alone publishing company and stand-alone broadcasting and digital company would benefit greatly from having our representatives on the board. As of the market close yesterday, Gannett's stock is down over 8% from the date you announced the spinoff,'' Icahn said. "I believe this is a result of the company's failure to adequately explain to investors the capital structure, debt capacity and business strategy for each of the post-spin companies. There has been a particular lack of clarity with respect to the publishing business, which we believe results in a fundamental misunderstanding of that company's future prospects."

Icahn, who also is seeking changes to Gannett's charter provisions regarding potential anti-takeover provisions and board structure, plans to nominate Michael Dornemann and Courtney Mather as directors at Gannett's annual shareholder meeting.

Dornemann is the former CEO of European TV and music giant Bertelsmann AG and is lead director at Take-Two Interactive Software. Mather, a former managing director at investment bank Goldman Sachs who works for Icahn, has an extensive background in mergers and acquisitions and would "be a tremendous resource" during the spinoff process, Icahn said.

"We have spoken with many large Gannett shareholders since we first announced our position," Icahn said. "Everyone seemed pleased by the company's spinoff announcement, but many expressed dissatisfaction with the company's governance profile and poor communication with the market. We believe that many of these shareholders will be supportive of our proposals and our director nominees, but we would prefer to work collaboratively with you and your board to find a mutually satisfactory solution to our concerns rather than engaging in a costly and distracting proxy fight. I hope that the notice we provided today is just the first step towards beginning a dialogue with your team."

Icahn is "overreaching,'' Gannett board chair Marge Magner said in a statement.

"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,'' Magner said. "His overreaching campaign to advance his own agenda will not deter the board of Gannett from continuing to serve the interests of all of our shareholders. In addition to performing well, Gannett has a strong track record of shareholder engagement and sound corporate governance. As we execute on the separation of our publishing business this year, shareholder interests will remain our priority."

Martore, in the same statement, said that since the launch of the company's strategic transformation in 2012, the company has achieved significant revenue growth and margin expansion.

"During that same period, we have made attractive acquisitions to execute on our announced strategy, our stock price has more than doubled and total shareholder return has exceeded 265%, outpacing the S&P 500 and our peers by a wide margin," Martore said.

"Our strong and independent board has been a driving force behind our strategic transformation, and our previously announced plan to separate into two publicly traded companies – a plan Mr. Icahn publicly supported following our announcement last summer and continues to support now," she said.

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