Gawker files for Chapter 11 bankruptcy
August 2016 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING
Financier Worldwide Magazine
Gawker Media Group (GMG), an online media company and blog network, filed a voluntary petition for relief under the provisions of Chapter 11 of the US Bankruptcy Court for the Southern District of New York.
GMG has filed for bankruptcy protection in order to protect its assets from former professional wrestler Hulk Hogan who, in March 2016, sued Gawker for posting a sex tape (involving Hogan) and was awarded $115m, plus $25m in damages, by a jury in Florida.
Although the news organisation appealed the ruling, the judge overseeing the case declined to issue a stay pending an appeal as this required GMG to put up a $50m bond, leading to the company declaring bankruptcy so that it could continue to operate and pay its staff.
The company has also entered into Chapter 11 proceedings due to Silicon Valley billionaire Peter Thiel’s third-party funding of a number of lawsuits against the company (including the Hogan lawsuit). Mr Thiel, the billionaire co-founder of PayPal, has been accused of conducting a vendetta against GMG following the publication of a story, a decade ago, which purportedly identified Mr Thiel as gay.
Alongside its bankruptcy filing, Gawker has also announced that it has entered into an asset purchase agreement to sell its seven media brands and other assets to Ziff Davis, a global digital media company which operates in the technology, gaming and lifestyle categories and is a subsidiary of j2 Global, Inc.
Ziff Davis has reportedly made an approximate $100m bid for GMG’s media brands, which include Gizmodo, a design and technology blog, which is said to have energised the debate about Facebook’s control of the news and Jalopnik and Kotaku, which are among the web’s leading sources for news and reviews of cars and video games.
Explaining the decision in a statement, Gawker said: “The sale and filing is intended to preserve the value of GMG’s pioneering digital news business, safeguard the jobs of journalists and other staff, and allow GMG to fund the appeal against the judgment in the Hulk Hogan case against the company in a Florida state court.”
Although the Chapter 11 filing is certainly the most significant change to the company’s corporate structure in its 14-year history, it is not, however, expected to affect Gawker’s normal editorial or business operations for the foreseeable future.
Likewise, the sale agreement with Ziff Davis, which will be conducted through a bankruptcy court supervised auction in which other bidders may offer a higher price for the company, is not envisaged to cause disruption, with GMG keen to maintain normal operations, publishing news and opinion on technology, politics and other interests to its six million readers each weekday.
“We are encouraged by the agreement with Ziff Davis, one of the most rigorously managed and profitable companies in digital media,” said Nick Denton, Gawker’s founder and owner. “A combination would marry Ziff Davis’ strength in e-commerce, licensing and video with GMG’s premium media brands.”
Advising GMG on the potential sale to Ziff Davis is investment bank Houlihan Lokey.
Confident that GMG will ultimately prevail in the Hogan lawsuit, Mr Denton said: “Authentic writing, whether it takes the form of honest reviews of technology, video games and entertainment, or revelations about the way the system works, is more important than ever.
“We have been forced by this litigation to give up our longstanding independence, but our writers remain committed to telling the true stories that underpin credibility with our millions of readers. With stronger backing and disentangled from litigation, they can perform their vital work on more platforms and in different forms.”
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