A significantly weakened deal to merge the nation’s two largest newspaper publishers heads to a shareholder vote on Thursday, reports The NY Post.
And it’s expected to be approved — despite the multitude of concerns that has the proposed acquisition of USA Today publisher Gannett by New Media Investment Group’s GateHouse Media struggling and gasping for air.
Since the cash and stock deal was unveiled on Aug. 5, the biggest single barrier to getting it done has been the fast and furious erosion of New Media stock, which will be used to help pay for Gannett .
The stock’s closing price of $7.13 on Tuesday is well below its pre-deal price of $10.70 a share. The plunge has lowered the value of the offer from the original $1.4 billion to just over $1.1 billion.
Adding to the merger’s woes, the NewsGuild, which represents workers at a number of papers from both companies, blasted the deal on Monday, saying it will lead to cuts that will close papers and hurt news coverage.
Despite the complex web of complications, most media observers think the big institutional shareholders will OK the deal Thursday, noting that they share many of the same investors and that they are being promised cost savings of $300 million.
Apollo will be supplying nearly $1.8 billion in secured loans to New Media at the sky-high interest rate of 11.5 % to do the deal, which initially drew the attention of the FCC. While the FCC doesn’t ordinarily weigh in on newspaper deals, a federal appeals court in Philadelphia had reinstated the old duopoly regulations that bar the same corporate owner from owning a TV station and a daily newspaper in the same market. That put the FCC into the mix on the newspaper deal since Apollo is in the process of buying majority control of the Cox Media Group, which owns 13 TV stations as well as three newspapers and radio stations in Ohio.
Apollo was summoned to Washington, DC, to explain its way around the duopoly clause. And one source said it was able to make some alterations to its loan guarantees, which satisfied the FCC.
On Oct. 24, an FCC spokesman said that “both transactions were under review by the commission.” As of Tuesday, the spokesman only said the Cox-Apollo deal was under review.
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