Takeover of Gannett creates print goliath in $1.4B deal
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 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 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.
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.
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.
Even before the merger, the two companies were the two largest chains in terms of both number of newspapers owned and circulation, according to researchers at the University of North Carolina. Combined, their papers would have a circulation of more than 8 million.
The agreement Monday calls for Gannett shareholders to receive $12.06 per share in a combination of cash and New Media shares, for a premium of about 18%.
Though New Media is buying its competitor, the company resulting from the deal will go by Gannett, a name that goes back to the early part of the 20th century, when Frank E. Gannett, who owned half of the Elmira Gazette in Elmira, New York, became a media baron with the acquisition of other newspapers.