Cara Lombardo and Jeffery A. Trachtenberg, for WSJ:
The country’s two largest newspaper chains agreed to combine their businesses in a roughly $1.4 billion deal, further consolidating an industry reeling from strong economic headwinds.
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 long-rumored GateHouse and Gannett merger is now confirmed. Some topline information from the above WSJ article and an earlier column in NiemanLabs:
- The merged company (which will be named Gannett) will control 265 dailies, thousands of weeklies, and a circulation of 8.7 million.
- New Gannett will far and away be the biggest newspaper chain in the country. (McClachy, the new number 2, has a print circulation of 1.7 million.)
- Some notable papers that will be affected: Gannett owns USA Today, The Arizona Republic, Detroit Free Press, Des Moines Register, IndyStar, El Paso Times, and Journal Central. GateHouse has The Palm Beach Post, Star Courier, New Jersey Herald, and approximately a hundred million dailies throughout rural America that you’ve never heard of.
- While the combined company will not have many direct local monopolies, there will be numerous regional clustering, i.e. regions of the country where New Gannett owns most of the region’s local dailies. This may pose regulatory problems, but clustering is kinda the point of the whole merger: it eliminates a lot of costs since New Gannett can use fewer printing plants for more papers and potentially consolidate many newsroom functions.
- Speaking of consolidation: the companies say that merging will allow them to get rid of $275 to $300 million redundancy costs. Ken Doctor at Nieman predicts this will primarily come from combining human resource, finance and technology departments; through bundling advertisement services; combining printing production; and—you were waiting for this one—newsroom layoffs. (Why have a reporter in another nearby city when you now own the daily in that city?)
- Doctor also has a source that say other newspaper companies will be watching this merger closely; if it goes well, expect more consolidation.
There isn’t much to say here other than I hope this doesn’t impact many newsrooms. (It will, but, you know, here’s hoping.) We are seeing the continued last gasp of a dying industry. This deal shows little signs of innovative thinking. New Gannett expects 25% of their revenue to come from digital, but is that enough for a business whose primary product (printed newspaper) is in a continual nosedive? Past newspaper consolidation has actually resulted in worse circulation numbers, as people stop subscribing to their suddenly worse local newspaper. What is to keep that from happening here?
I suspect New Gannett is not overtly concerned with that. The massive debt load they will likely incure from this deal (over a hundred million in payments annually!) means they will not have much headroom to expand or adapt. It becomes a matter of desperate survival, and getting as much money as possible before everything inevitably crashes down.