Gannett merges with GateHouse
NEW YORK – Two of the country’s largest newspaper companies have agreed to combine in the latest media deal driven by the industry’s struggles with a decline in printed editions.
GateHouse Media, a chain backed by an investment firm, is buying Arizona Republic owner Gannett Co. for $12.06 a share in cash and stock, or about $1.4 billion. The combined company would have more than 260 daily papers in the U.S. along with more than 300 weeklies. It would be the largest U.S. newspaper company by far, with a print circulation of 8.7 million, 7 million more than the new No. 2, McClatchy, according to media expert Ken Doctor.
The companies said Monday that the deal will result in up to $300 million in annual cost savings.
GateHouse Media’s owner and Gannett have agreed to merge in a deal aimed at cutting overlapping costs and enabling the combined company to pursue a digital transformation as the media industry grapples with the disruptive forces of online news, social media and smartphones.
New Media Investment Group said Monday that it reached a deal to acquire Gannett, which owns USA TODAY and more than 100 other daily publications and digital marketing services such as ReachLocal.
Pittsford, New York-based GateHouse, the operating subsidiary of New Media Investment Group, will combine with McLean, Virginia-based Gannett, the larger of the two companies, in a cash-and-stock deal worth about $1.38 billion and financed in part with new private-equity debt.
Together, the two companies would operate more than 260 daily news operations – far more than any other U.S. news publisher – and boast potentially the largest online audience of any American news provider.
The combined company will be based at Gannett’s headquarters outside Washington, D.C.
New Media Investment Group CEO Michael Reed will remain CEO of the umbrella company, which will be named Gannett after the deal closes. Paul Bascobert, former XO Group president, former Bloomberg LP chief operating officer and former Dow Jones chief marketing officer, was appointed CEO of the current Gannett.
Bascobert will serve as CEO of the combined Gannett-GateHouse subsidiary, and Reed will remain at the top of the umbrella company, which will also take on the name Gannett. Gannett’s current chief financial officer, Alison Engel, is expected to hold that post in the new Gannett.
The acquisition is expected to close around the end of the year.
The companies estimated they can save $275 million to $300 million in annual costs within 24 months. They said the savings would come primarily from the “increased scale of the new organization, sharing of best practices, leveraging existing infrastructure, facility rationalization and other judicious cost reductions.”
New Media shareholders will own 50.5% of the combined company, and Gannett shareholders will own 49.5%. The company’s nine-member board will consist of five directors from New Media, three from Gannett, and New Media’s current lead director, Kevin Sheehan.
“We believe this transaction will create value for our shareholders, greater opportunities for our employees, and a stronger future for journalism,” Reed said in a statement.
Private equity firm Apollo Global Management provided a five-year secured loan worth of $1.792 billion to help finance the deal.
“The Gannett Board unanimously determined that this combination with New Media is in the best interests of Gannett shareholders, customers, audiences, and employees, providing significant and immediate value, as well as the ability to benefit from the upside potential of the combined company,” J. Jeffry Louis, chairman of Gannett, said in a statement. Louis added that the two companies are a strong “cultural fit.”
Both companies face a sharp decline in print revenue. Across the industry, newspapers lost about 57% of their advertising and circulation revenue and about 49% of their weekday print circulation from 2000 to 2018, according to the Pew Research Center.
After reports of the potential deal emerged in recent weeks, analysts told USA TODAY that the deal could help give the two companies time to reduce their expenses and secure enough digital revenue to maintain significant news operations.
The stakes are high. The fate of forprofit local journalism hangs in the balance as the news industry spars with digital giants Google, Facebook and others for revenue and the attention of Americans.