Brownwood News – The owner of the Brownwood Bulletin newspaper has announced an agreement to acquire Gannett Co., Inc., creating the largest publishing company in the United States.
New Media Investment Group Inc., parent company of GateHouse Media, owner of the Bulletin, said the transaction is subject to regulatory review, which is anticipated to take several months. Mike Reed, Chairman and CEO of New Media, will serve as Chairman and CEO of the combined public company which will go by the name Gannett.
A Forbes report last week was negative on the merger and offered the following assessment:
GateHouse and its New Media Investment group have also followed a business model that seeks to maximize financial returns by reducing the costs of production. Inevitably, this has meant a reduction in the number of reporters covering local news. According to a recent report from the Knight Commission on Trust, Media and Democracy, “more than 25,000 fewer journalists are working today in communities across the country than in 2007, even considering employment growth from digital news outlets.” Nationally, the number of newsroom employees dropped from 71,000 in 2008 to 39,000 in 2017, a reduction of 45%. According to a study by the University of North Carolina, the U.S. has lost more than 1,800 local newspapers since 2004. Today, more than 1,300 communities across the U.S. are without local news coverage from a paper. This week’s merger will almost certainly accelerate these negative trends.
Describing the reasoning behind their deal, GateHouse and Gannett said the merger will reduce operating costs by $300 million annually. At the same time, they promised to continue to “invest in newsrooms,” although it’s difficult to see how they will reconcile the two opposing imperatives. While the companies say that the merger will “enhance quality journalism,” they declined to predict how many local newsroom jobs will be eliminated. The deal is being financed by Apollo Global Management, and it’s reasonable to predict that Apollo will press for those promised cuts in operating costs.
According to a story in the Brownwood Bulletin, starting this week, the Bulletin print edition will no longer be built on site. The Center for News and Design in Austin will take over the responsibility, which will also result in earlier deadlines. More changes could be on the way.
GateHouse is based in Pittsford, New York and publishes 154 daily newspapers. As of June 30, 2019, New Media operates in over 600 markets across 39 states reaching over 21 million people on a weekly basis and serves over 200,000 business customers.
Gannett is based in McLean, Virginia, has more than 100 local brands but is perhaps best known as the publisher of USA TODAY which is read by 1.6 million people daily.
Under the terms of the Merger Agreement, shareholders of Gannett will receive $6.25 in cash and 0.5427 of a New Media share for each Gannett share they hold, representing total consideration of $12.06 per Gannett common share based on New Media’s closing stock price as of August 2, 2019, and a premium of approximately 18% to the five-day volume-weighted average price of Gannett shares as of that date. After the close of the transaction, Gannett shareholders will hold approximately 49.5% of the combined company and New Media shareholders will hold approximately 50.5%