On Monday, New Media Investment Group (NYSE: NEWM), who owns GateHouse Media, agreed to buy Gannett (NYSE: GCI) in a cash and stock deal valued at $1.4 billion. Gannett is the owner of USA TODAY, the Detroit Free Press, the Arizona Republic and more than 100 other publications across the country. GateHouse Media owns 154 daily newspapers in 39 states. Together, the merged company will operate 263 daily media organizations across 47 states and Guam with a combined audience of over 145 million unique monthly visitors. The merged company will use the Gannett name.
According to an August 5 news release, Gannett shareholders will receive $6.25 in cash and 0.5427 of a New Media share for each Gannett share, or approximately $12.06 per share of Gannett common stock, based on New Medias closing price on August 2. This represents a premium of 18%. Once the transaction is complete, Gannett shareholders will hold about 49.5% of the new company and New Media shareholders will hold 50.5%. Both companies boards unanimously approved the deal. The deal is expected to close by year end, assuming regulatory approval.
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We see numerous opportunities to leverage the combined companys enhanced scale and financial strength to continue to drive growth in the digital future. Importantly, we have found in New Media a strong partner and cultural fit for Gannett as we continue delivering on a shared commitment to journalistic excellence for the communities we serve, said J. Jeffry Louis, Chairman of the Gannett board.
Michael Reed, the chairman and CEO of New Media, will remain chairman of the board and CEO. Gannetts new CEO Paul Bascobert will serve as CEO of the combined companys operating subsidiary. In addition to Reed, New Media will contribute five independent members to the board of directors, while Gannett will have three.
We believe this transaction will create value for our shareholders, greater opportunities for our employees, and a stronger future for journalism. Gannett is an innovative, digitally-focused media and marketing solutions company with well-known brands worldwide, said Reed in the news release. Uniting our talented employees and complementary portfolios will enable us to expand our comprehensive, hyperlocal coverage for consumers, deepen our product offering for local businesses, and accelerate our shift from print-centric to dynamic multimedia operations.
We are honored to become a part of Gannetts storied history and a steward of their strong media properties into the future. We are committed to delivering significant synergies in a thoughtful manner, consistent with our shared goals for the business, Reed added.
The companies say that one key advantage is an estimated cost savings of $275 million to $300 million annually by operating as one. The cost savings are anticipated to come within 24 months of the deals closing. Poynter believes that the majority of cost synergies will come from consolidating operations, but staff reductions will likely comprise some of the anticipated savings.
At the same time, the companies plan to invest in newsrooms through product development, training and better understanding readers needs. Coming from two companies that have repeatedly slashed newsroom staff over the last few years, new investment is a bit hard to believe.
The latest round of layoffs came from GateHouse in May when the company laid off 200 in its second round of layoffs in 2019. When the news was leaked, Reed called it a small restructuring, because 200 employees represented a small percentage of their 11,000 employees.
Earlier this year, Gannett fought off a hostile takeover from Digital First Media. The two firms battled for months with Gannett finally emerging victorious in May. Shortly after that, Gannett was rumored to be in merger talks with GateHouse Media, McClatchy and Tribune Publishing.
Will a merger save these companies from the issues plaguing the media industry over the last decade? Poynter says probably not.
The deal does not buy an exemption to the industrys persistent problems of declining print advertising and circulation. And regional papers have been slow in building paid digital subscription numbers. However, the resulting savings will make for a cushion of time to work out solutions, writes Rick Edmonds for Poynter in a pre-deal article.
This deal has raised a lot of questions – and eyebrows – in the media industry. Did Digital First Medias hostile takeover attempt push Gannett into searching for a buyer that was more palatable? How will the two companies merge their operations? Will they consolidate and cut even more newsroom staff? Will smaller markets find their newspapers replaced with regional counterparts? Will a merger really help the companies accelerate their digital transformation or is that just wishful thinking? What will happen to Gannetts executive leadership team? How will a media behemoth impact journalism in the United States? Im sure well learn more in the months to come, but until then, there seem to be more questions than answers.