New Media to buy USA Today-owner Gannett for US$1.4 billion

August 06, 2019 08:32
Gannet has invested millions in the last few years to scale up its digital footprint, but sales have not quite picked up as yet. Photo: Bloomberg

New Media Investment Group said it will buy USA Today-owner Gannett Co. in a US$1.4 billion deal, creating the biggest newspaper owner in the United States, Reuters reports.

Faced with declining revenue, Gannet has invested millions in the last few years to scale up its digital footprint. Sales, however, haven’t quite picked up as yet.

The company, which also owns local papers ranging from the Detroit Free Press to the El Paso Times, missed second-quarter revenue on Monday.

Now by merging, the companies expect to cut costs by US$275 million to US$300 million annually and said they would together have 263 daily media organizations across 47 states, as well as USA Today. New Media and Gannett are the largest US newspaper owners by circulation, according to Statista.

About 25 percent of the combined company’s revenue will come from digital, New Media Chief Executive Officer Michael Reed said on a conference call on Monday.

New Media is run by Fortress Investment Group, which is owned by Japan’s SoftBank Group Corp., and has built the largest chain of local US papers, including 156 dailies from the Austin American-Statesman to the Register-Guard in Eugene, Oregon.

After the merger closes, expected by the second half of 2019, New Media will hold about 50.5 percent stake in the combined company, to be led by Reed.

Gannett shareholders will receive US$6.25 in cash and 0.5427 of a New Media share for each share they hold, amounting to US$12.06, which represents 12.2 percent premium to Gannett’s Friday close.

The US$1.4 billion equity value is based on 116.7 million outstanding shares as of June 30.

Both New Media and its operating subsidiary GateHouse will be rebranded and operate under brand “Gannett”.

Earlier this year, Gannett fended off newspaper chain MNG Enterprises’s efforts to put its nominees on its board, after it rejected MNG’s US$1.36 billion hostile takeover bid.

Shares of Gannett closed up 2.6 percent at US$11.04, while those of New Media Investment Group closed down 7.6 percent at US$9.89.

While New Media reported revenue of US$404 million in its second quarter on Monday, Gannett had revenue of US$660 million.

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