GateHouse Media owner to acquire Gannett for $1.4B

An agreement between two large newspaper chains Monday laid the groundwork for a new publishing behemoth while raising questions about future investments in local journalism.

New Media Investment Group, a holding company that controls GateHouse Media, announced that it had agreed to buy Gannett, owner of USA Today and more than 100 other publications nationwide, in a transaction valued at roughly $1.4 billion.

Once combined, GateHouse and Gannett will publish more than 260 daily newspapers in the United States, along with more than 300 weekly publications in 47 states as well as Guam. The new company will go by the name Gannett.

The companies expect that savings from the merger, which is expected to be completed by the end of the year, would total as much as $300 million annually. And though they said the merger would “enhance quality journalism,” both companies have cut costs in recent years by laying off journalists.

Gannett owns The Detroit Free Press, The Arizona Republic, The Milwaukee Journal Sentinel and other prominent newspapers in small, midsize and large cities. GateHouse Media, which owns 154 daily newspapers and operates in 39 states, has been on a buying spree in recent years, striking deals to acquire the Austin AmericanStatesman in Texas, the Palm Beach Post in Florida and the Akron Beacon Journal in Ohio.

The planned merger comes more out of perceived weakness than strength: With a few exceptions, newspapers are struggling as readers abandon ink and paper in favor of websites and news apps. Print advertising revenue has plummeted, and the money publishers have made from digital advertising has fallen short of what newspapers used to bring in from print ads.

One result has been the increase in so-called ghost papers — thin versions of once robust publications put out by barebones staffs. Although print newspapers are in steep decline, Wall Street-backed companies like GateHouse Media and MediaNews Group see them as still valuable, if distressed, assets.

In 2018, the print business still brought in $25 billion, according to a study by the University of North Carolina. New Media Investment Group, a publicly traded company with headquarters near Rochester, N.Y., has put money into journalism through GateHouse Media.

In recent years, GateHouse Media has shrunk newsrooms while pursuing shareholder value, in part by consolidating operations in regional hubs and merging newspapers. Gannett, which has been in the news business for nearly a century, laid off journalists all across the country earlier this year.

In a conference call Monday, Michael Reed, the New Media chairman and chief executive who will run the combined company, declined to specify how cost savings would result from the merger, citing “efficiencies” and “cost reallocation.” New Media is managed by New York investment management firm Fortress Investment Group through an affiliate. Fortress is owned by SoftBank, a Japanese conglomerate.