USA Today publisher Gannett Co. reportedly was considering an acquisition of a major newspaper company even as it held parallel talks to sell itself to New Media Investment Group Inc.
Early last month, New Media agreed to acquire Gannett Co. in a $1.38 billion deal that unites the two biggest U.S. daily newspaper chains in an industry that’s consolidating to survive.
However, in a recent SEC filing, the company that Gannett wanted to buy is identified only as “Company A.” But one observer noted after reading the S-4 document that the target “is clearly Tribune Publishing,” the New York Post’s Keith J. Kelly reported.
“After three months of talks, the Gannett board said in an April 24 letter to “Company A” that it wanted to postpone the acquisition talks while still beating back a hostile takeover bid from Heath Freeman’s hedge fund, Alden Global Capital, and MNG Media. The Gannett board turned-thumbs down on MNG at its late- May shareholders meeting,” Kelly reported.
“But the board was frantically looking at other deals. As recently as June 10, the Gannett board was still holding internal discussions about whether to go it alone, acquire Tribune — “Company A” — or allow a takeover by New Media Investment Group, parent of Gatehouse Media,” Kelly explained.
Meanwhile, the New Media-Gannett merged entity will be a local news giant that owns more than one-sixth of all daily newspapers in the country, including USA Today, and reaches nearly 9 million print readers, according to industry analyst Ken Doctor. All told, it will have 263 daily media outlets across 47 states, Bloomberg reported.
The acquisition also sets the stage for further cutbacks in an industry already reeling from them. The companies said the deal will better allow them to provide marketing services to local businesses, deliver local journalism to communities and transition to a digital future. But they also said they anticipate about $300 million in cost savings each year from the transaction, which could lead to further cuts to news staffs. The combined company said it would invest in its newsrooms and search for cost reductions “in a judicious manner.”
New Media plans to pay cash and shares worth $12.06 a Gannett share, leaving Gannett holders with about 49.5% of the combined company. Gannett investors applauded the long-beleaguered company finding a buyer, sending shares up as much as 5.1%. New Media shareholders, meanwhile, were skeptical that the deal would pay off. Its stock lost as much as 8.6%.
The deal comes just months after Gannett fought off a hostile takeover bid by MNG Enterprises Inc., which is backed by the hedge fund Alden Global Capital. It also increases pressure on other local newspaper owners, such as Tribune Publishing Co., Lee Enterprises Inc. and McClatchy Co., to find deals of their own.
The newspaper industry has been in a downward spiral for years as the internet has upended its business model. Readers have moved online and get their news from social media, eroding print advertising sales. Much of the online ad market, meanwhile, is being gobbled up by Facebook and Google. And many newspapers have eroded their quality by ordering deep cuts to their newsrooms, making it increasingly difficult to persuade readers to pay for online subscriptions.
Newspaper executives see few options other than consolidation to cut even more costs, from sharing printing operations to eliminating local copy editors and designers. The number of newspaper newsroom employees dropped by 47% between 2008 and 2018, from about 71,000 workers to 38,000, according to Pew Research Center.
The deal further solidifies the power of private equity firms and hedge funds in the newspaper business. New Media is managed and controlled by private equity firm Fortress Investment Group. Alden Global owns about 60 daily newspapers, including the Denver Post, through MNG, also known as Digital First Media. The hedge fund Chatham Asset Management LLC is one of the largest shareholders and bondholders in McClatchy, publisher of the Charlotte Observer and Miami Herald.
After emerging from bankruptcy in 2013, New Media has been on a buying spree and now owns almost 150 newspapers in smaller cities like Columbus, Ohio, and Providence, Rhode Island. Like its peers, it has developed a reputation for cutting staff from its newsrooms.