Shareholders of Gannett and GateHouse Media approved a deal to combine the companies Thursday, after company managers promised to find $300 million in annual savings that some critics warned would further squeeze already shrunken newsrooms but that some investors warned may not go far enough.
In the deal, GateHouse parent New Media Investment Group will purchase Gannett for $12.06 per share in stock and cash, creating a conglomerate that will own more than 250 daily newspapers, including USA Today, the Milwaukee Journal Sentinel and the Indianapolis Star, plus more than 300 weeklies and community papers.
Their combined print circulation will exceed 8 million, according to the University of North Carolina researchers.
The new company -- run by GateHouse's management under Gannett's name -- will be under pressure to find $300 million in annual savings within the first two years of the deal, as the GateHouse management pledged when it announced the deal in August.
The merger is expected to reach formal completion Tuesday, the companies said in a statement Thursday. Shareholders with stakes in both companies voted in favor.
Journalism experts and the country's leading newspaper union have warned that the deal will enrich GateHouse's private equity backers while further eroding the number of reporters, editors and photographers covering local communities.
Last week the NewsGuild-CWA, which represents more than 20,000 journalists, issued an analysis of the deal warning that the merger "will hurt the communities these media organizations serve."
"The deal is bad for journalists, it's bad for readers, and it's bad for the future of local journalism," the News Guild-CWA president, Bernie Lunzer, said in a statement Thursday. "Local papers will likely vanish, jobs will be slashed, and reporting will suffer."
But some of GateHouse's top shareholders have criticized the deal for their own reasons, and the stock price of its parent company, New Media, fell by 29% during the past week, to an all-time low of $6.57 when markets closed Thursday. As a result the deal, originally valued at $1.4 billion, is now closer to $1.2 billion.
"Neither company has digital chops that have you jumping out of your seat," said media analyst Doug Arthur of Huber Research. Gannett has been pushing to take in digital advertising and subscription revenue, but Arthur said both firms missed his most recent revenue targets.
"At the end of the day there's got to be some revenue magic somewhere," he said.
The new company has a nine-member board that includes no current or former journalists.
Joining Michael Reed, who is chairman, are former gambling executive Kevin Sheehan, marketing executive Mayur Gupta, finance executive Theodore Janulis, Gannett Chairman John Jeffry Louis, marketing executive Maria Miller, marketing consultant Debra Sandler, former footwear executive Laurence Tarica and Barbara Wall, chief legal officer at Gannett. Six members are from New Media, and three are from Gannett.
Two journalists who until the deal closed served on the Gannett board are not on the new board: Stephen Coll, dean of the Columbia University graduate school of journalism, and Larry Kramer, former president of USA Today.
Media executive Paul Bascobert has been named chief executive of the combined company.
Founded in 1906, Gannett became one of the Washington area's biggest corporate names in the heyday of the newspaper industry, introducing the country to a national newspaper in USA Today.
Gannett's business has always been journalism, ever since its founder, Frank Gannett, became a newspaper baron roughly a century ago. In contrast, the money that has allowed GateHouse Media to go on a buying spree in recent years derives from Fortress Investment Group, a New York financial firm that is owned by Japanese conglomerate SoftBank.
As the print media industry began to suffer financially in the past two decades, Gannett enacted numerous cost-saving measures, before spinning off its broadcast and marketing units into a separate company. Gannett was last on the Fortune 500 list in 2014 and in the past two years alone the number of employees at the company has fallen by one-fifth.
Ever since Gannett spun off from Tegna, its broadcasting arm, four years ago, it has been looking to grow through mergers or acquisitions, with little to show for it.
Information for this article was contributed by Jonathan O'Connell of The Washington Post; and by Marc Tracy of The New York Times.
Business on 11/15/2019