Two newspaper publishers near a major merger

Gannett, publisher of USA Today, is in advanced talks to combine with GateHouse Media in a deal that would merge the two largest owners of newspapers in the U.S. by circulation, said two people briefed about the matter.

GateHouse, which is controlled by Softbank’s Fortress Investment Group, has made a cash-and-stock bid to buy Gannett, said those informed about the terms of the deal.

Gannett’s board is expected to approve the takeover in the coming weeks but an agreement has yet to be clinched and those briefed about the negotiations cautioned that the talks could still fall apart.

If the deal goes through, about one in every six newspapers in the U.S. would be owned by a single company, estimated Ken Doctor, a media analyst with Newsonomics.

“That’s an unprecedented concentration of control in the history of the American press,” he said.

A deal would come months after Gannett successfully thwarted a hostile takeover approach by MNG Enterprise, a rival regional newspaper publisher backed by hedge fund Alden Group, which has a reputation of hollowing out American newsrooms.

Gannett’s shares rose 20% to $9.46 on Friday. The Wall Street Journal first reported the two were nearing a deal to combine.

The talks come as local and regional newspapers, faced with grim prospects and the decline of print advertising, have undergone sweeping consolidation.

“These companies’ leaders think a mega-merger buys two or three years — ‘until we figure it out,’ ” Doctor said. “The ‘it’ is that longhoped-for chimera of successful digital transformation.”

More than 1,800 newspapers in the United States have shut down over the last 15 years because of worsening trading conditions partly driven by the growth of tech giants such as Google and Facebook, which dominate the advertising market.

GateHouse is the second-largest owner of U.S. newspapers, behind Gannett. The company owns 156 daily newspapers, mostly in small markets, such as the Austin American-Statesman.

Gannett has about 110 newspapers across the country, including larger regional titles the Detroit Free Press, Indiana Star and the Arizona Republic.

Neither company could immediately be reached for comment.