Gannett and GateHouse Media are reportedly discussing a possible merger to cut costs while expanding their audience reach, says USA Today, a Gannett-owned newspaper. The news comes just two weeks after Gannett successfully fought a hostile takeover by rejecting MNG Enterprises board candidates and days after GateHouse Media announced layoffs of 200 in a small restructuring. The Wall Street Journal reports that Gannett has also explored possible deals with Tribune Publishing and McClatchy.
In addition to USA Today, Gannett owns 108 local media organizations in 34 states and Guam, more than 160 digital news brands in the U.K. and ReachLocal. The company estimates it has over 125 million unique website visitors to USA today and its other local news sites. In terms of circulation, Gannett newspapers have a total daily audience of 6 million readers and USA Today has 2.4 million readers.
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GateHouse Media publishes 156 daily newspapers and 464 community publications in more than 615 local markets and 39 states. Its estimated reach is 22 million per week. A merger of the two companies would create a huge media organization with unmatched reach.
In a May 30 Newsonomics column for Nieman Lab, media expert Ken Doctor says such a merger would mean that one of every six newspapers in the U.S. would be owned by the new, combined company. Doctor reports that a merger could help the companies realize between $40 million to $50 million in synergies by regionalizing business operations like printing, distribution and ad sales – possibly even editorial and reporting functions.
Doctor also reminds us that the trend in 2019 is for media organizations to consolidate for sheer survival at this point. Print revenue continues to decline and legacy media organizations continue to struggle with digital transformations. Mergers provide some companies with short-term cash, but they come with the price tag of severance costs and, Doctor says, it only buys the companies time.
In related news, MNG Enterprises, owned by Alden Global Capital, has reduced its stake in Gannett from 7.5% to 4.2%, according to a filing with theSecurities and Exchange Commission.This move came four days after the initial voting results of Gannetts annual shareholder meeting, which unanimously rejected MNGs bid to replace three of Gannetts board of directors with its own picks.
Since news of a possible deal was first disclosed by the Wall Street Journal, Gannett (NYSE: GCI) stock inched up slightly, but it has since returned to within a penny of its value last Wednesday. As of 5:26 p.m. EDT yesterday, Gannett stock was valued at $7.64.
Meanwhile, despite the layoffs, GateHouse Media (NYSE: NEWM) stock is up. On May 29, it was valued at $8.60 per share. It has since jumped to $9.25 per share, as of 5:26 p.m. EDT yesterday.
At this point, it is too early to tell what Gannett and GateHouse will do or if Gannett will entertain merger opportunities with other major media corporations. Ken Doctor, of course, is spot on with the media consolidation that is happening and that will continue to happen until theyve cannibalized themselves. Legacy print organizations have waited far too long to cross the digital divide, and it has cost them dearly. At this point, only the strongest – or those with the most money – will survive.