New Media Investment Group Inc., the parent of GateHouse Media, is buying Gannett Co. in a cash-and-stock transaction, the companies said Monday. New Media will pay $6.25 in cash and 0.5427 New Media share for a total of $12.06 for each Gannett share.
The deal combines the largest owner of U.S. newspapers by titles—GateHouse, with 400 papers and a total circulation of 4.29 million—and the largest newspaper group by circulation—Gannett, with a circulation of 4.32 million and 215 titles including USA Today, according to a University of North Carolina study.
The tie-up will test whether a new local-news colossus will be better equipped to deal with the rapid decline in print advertising and increased competition from tech giants as Alphabet Inc.’s Google and Facebook Inc. for digital advertising dollars.
More than 2,100 newspapers have closed since 2004, according to the UNC study. Google and Facebook together are expected to take 51% of all U.S. digital ad spending in 2019, according to research firm eMarketer.
The deal will give a towering role in the local-news industry to a private-equity-backed entity, underscoring the rise in the industry of financial investors who have been relentless about cutting costs.
Michael Reed, chief executive of Pittsford, N.Y.-based New Media Investment Group, will serve as CEO of the combined companies, while the company will retain the Gannett name and its McLean, Va., headquarters. Gannett on Monday also named former XO Group President Paul Bascobert as its new president and CEO, succeeding former CEO Robert Dickey, who retired in May.
GateHouse is known for rigorous cost-cutting, including layoffs. New Media is operated by private-equity firm Fortress Investment Group LLC, which is owned by Japanese telecommunications-and-investing giant SoftBank Group Corp.
In a sign that GateHouse plans to follow its well-worn playbook and look hard for overlapping costs to cut, the companies said they expect to eliminate roughly $275 million to $300 million of expenses annually—a big number considering the size of the deal.
The deal is expected to close by the end of 2019, pending regulatory approval and approval from both companies’ shareholders. Gannett shareholders will own roughly 49.5% of the combined company, with New Media shareholders owning the rest.
Gannett reported financial results concurrently with announcing the deal. It said net income surged 64% to $26.7 million in the second quarter from the year-earlier period, boosted in part by $32.8 million of gains on property sales.
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