Gannett, GateHouse to merge in tie-up of big US newspaper groups

[WASHINGTON] USA Today publisher Gannett agreed to a merger on Monday with rival GateHouse in a deal creating the largest US newspaper group, aiming for bigger scale to face the challenges of the troubled sector.

GateHouse parent New Media Investment Group will buy Gannett in a cash-and-stock transaction valued at around US$1.4 billion that creates a media company with 263 dailies and reaching 145 million customers.

Michael Reed, New Media chairman and chief executive, said he expects the deal "will transform the landscape in the print and digital news business" and help the firms accelerate the transformation to digital.

The combined company will operate under the Gannett brand, with former Bloomberg and Dow Jones executive Paul Bascobert named chief executive in the deal, expected to close before the end of the year.

Jeffry Louis, chairman of the Gannett board, said the tie-up could help the publishers "leverage the combined company's enhanced scale and financial strength to continue to drive growth in the digital future."

Under the deal, New Media will offer stock and cash worth US$12.06 per Gannett share and New Media shareholders will hold approximately 50.5 per cent of the combined company.

The deal comes with the newspaper sector mired in an extended slump as consumers and advertisers shift to digital platforms.

According to a recent Pew Research Centre survey, newspaper circulation has fallen to its lowest level since 1940, even accounting for online readership.

A separate report by the University of North Carolina last year found some 1,800 local US newspapers, including many weeklies, had failed since 2004, leaving many communities as "news deserts."

Gannett earlier this year fended off a hostile takeover bid from hedge fund-backed Digital First Media, and in 2016 failed to seal a deal to combine with Tribune Publishing, another newspaper chain.

GateHouse operates in numerous small- and medium-sized markets, with newspapers including the Austin American-Statesman in Texas, Providence Journal in Rhode Island and the Akron Beacon Journal in Ohio.

WILL COST-SAVINGS HELP?

A joint statement said the Gannett-GateHouse deal could help realize cost savings of US$275 million to US$300 million annually.

Yet whether the tie-up will reinvigorate the news business in the communities they serve remains an open question.

"There's certainly strength in numbers and the companies have fairly similar cultures and a commitment to local journalism," said Ken Paulson, a former USA Today editor who is now on the faculty at Middle Tennessee State University.

"It's also a plus for USA Today to be able to work with an even larger network of news organizations. Sadly, though, this is largely a matter of buying time while searching for that still-elusive business model that will allow the newspaper business to stabilise."

Jeff Jarvis, a professor at the City University of New York journalism school, said the new company needs a better vision more than cost savings.

"Both Gannett and GateHouse have gone through considerable cost-cutting, and more cuts would be deleterious to quality," Prof Jarvis said.

"They need to see themselves not as a factory for content but a hub for service to the community. They have the scale to reinvent themselves. But if all they are going to do is to make their content cheaper and cheaper it's not going to work."

Dan Kennedy, a journalism professor at Northeastern University who follows the newspaper sector, said it remains unclear whether the merger will be positive for local news coverage.

"What's more important with these combinations is the amount of debt they take on to finance the deal and that has to be paid off," Prof Kennedy said.

"So I don't think it's good news for the communities that they serve."

AFP