Merger Agreement Between DallasNews Corporation and Hearst
Two weeks after signing a definitive merger agreement with Hearst, DallasNews Corporation this week received a nonbinding offer from MNG Enterprises Inc., an affiliate of Alden Global Capital, to purchase all shares of the company.
DallasNews Corporation is the public parent company of The Dallas Morning News and Medium Giant, an integrated creative marketing agency, with offices in Dallas and Tulsa.
Review of the MNG Proposal
The Board of Directors of DallasNews Corporation said in a release it is “carefully reviewing the MNG Proposal in consultation with its legal and financial advisors.”
The release also states that the board “has not changed its recommendation in support of the [Hearst] merger under the Merger Agreement.”
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Ownership Structure and Influence
Robert W. Decherd, a great-grandson of co-founder George Bannerman Dealey, is the controlling shareholder of DallasNews Corporation, holding the majority of voting power. Over a career spanning 50 years, he served as DallasNews Corporation’s board chairman, president and CEO.
The company’s unique family ownership structure means Decherd’s stake gives him significant influence over any deal that determines the company’s future.
Support for the Hearst Agreement
On Wednesday, Decherd affirmed his complete support for the Hearst agreement with a statement saying he “gladly signed a voting agreement whereby I will vote my controlling interest in favor of the merger.”
“Hearst is a nearly unique legacy newspaper company in an era where many, if not most, of the principles that have created great journalism in local newspapers are being ignored in the financial consolidation of the industry,” Decherd said in a statement. “The negative effect on American communities is very real.
“The continuation of The Dallas Morning News’ role in Dallas and North Texas is crucial to the well-being of our city, its citizens, and the democracy we all value so highly.”
Alden Global Capital’s MediaNews Group
Alden Global Capital’s MediaNews Group owns 77 daily newspapers and more than 150 weekly publications across the country, including The Chicago Tribune, The Denver Post, The Mercury News, The Virginian-Pilot and the Boston Herald.
In a Tuesday filing with the Securities and Exchange Commission, MediaNews Group offered DallasNews shareholders $16.50 a share, a nearly 18% increase from the agreement with Hearst, which is for $14 a share. Both offers are cash. The new offer values the company at $88 million.
A Superior Proposal
“We have been considering a potential transaction with DallasNews for several years, because we are consistently impressed with its commitment to high-quality local journalism supported by operational efficiency that maximizes resources available for the newsroom,” the group said in a letter to the DallasNews Corporation board of directors, calling its offer a “superior proposal.”
Dual-Class Structure and Voting Power
DallasNews Corporation became a public company in 1981 and its stock was uniquely set up with a dual-class structure, Series A Common Stock and Series B Common Stock. From a July 9 filing with the SEC, Decherd, his family and foundation own 96.2% of the Series B shares, along with 1.6% of the Series A shares.
Class B shares have more voting power; Class A shares are considered common stock with no preferential treatment. However, the company’s structure ensures Decherd’s influence over the company’s future. Decherd’s Class B shares have 10 votes for every one vote of Class A shares, giving Decherd 55% of the total voting power.
Future of the Company
“From my perspective, the terms and conditions of the Hearst merger are superior to any alternative scenario I can envision,” Decherd said in his statement. “I plan to honor the agreement I have made to vote in favor of the merger and look forward to the merger being consummated at the soonest possible time.”
Unsolicited Bids and Merger Agreements
In the SEC filing, MediaNews Group disclosed it owns 9.9% of the Series A Common Stock, acquiring all of it since July 11, two days after DallasNews Corporation and Hearst signed a definitive merger agreement. That amounts to 470,000 shares.
It’s not unusual for a merger target to receive an unsolicited bid. Although a board of directors has a fiduciary responsibility to review any competitive offers, it is not obligated to accept.
According to a 2024 study by the Harvard Law School Forum on Corporate Governance, unsolicited bids are a sliver of overall mergers and acquisitions transactions — an indicator of how unsuccessful most are. Unsolicited takeover attempts accounted for approximately 8% of global M&A in 2023, compared to about 10% the prior year.
Expected Outcome
Grant Moise, CEO of DallasNews Corporation and publisher of The News, and Steven R. Swartz, president and CEO of Hearst, have jointly expressed enthusiasm for their agreement, which was unanimously approved by the boards of directors from both companies and is expected to close in September or October.
Business editor Javier E. David contributed to this story.
Conclusion
The merger agreement between DallasNews Corporation and Hearst is still on track, despite the unsolicited bid from MNG Enterprises Inc. The board of directors is carefully reviewing the proposal, but has not changed its recommendation in support of the Hearst merger. The future of the company remains uncertain, but one thing is clear: the continuation of The Dallas Morning News’ role in Dallas and North Texas is crucial to the well-being of the city and its citizens.
Frequently Asked Questions
Q: What is the current status of the merger agreement between DallasNews Corporation and Hearst?
A: The merger agreement is still on track, despite the unsolicited bid from MNG Enterprises Inc. The board of directors is carefully reviewing the proposal, but has not changed its recommendation in support of the Hearst merger.
Q: Who is the controlling shareholder of DallasNews Corporation?
A: Robert W. Decherd, a great-grandson of co-founder George Bannerman Dealey, is the controlling shareholder of DallasNews Corporation, holding the majority of voting power.
Q: What is the significance of the dual-class structure of DallasNews Corporation’s stock?
A: The dual-class structure, with Series A Common Stock and Series B Common Stock, ensures Decherd’s influence over the company’s future. Class B shares have more voting power, giving Decherd 55% of the total voting power.
Q: What is the expected outcome of the merger agreement?
A: The merger agreement is expected to close in September or October, and has been unanimously approved by the boards of directors from both companies.
