GateHouse Media will buy Gannett Co. Inc., USA Today reported on Monday afternoon. USA Today is the flagship newspaper for Gannett, which also owns the Press-Citizen and Des Moines Register. The two companies agreed to a “cash-and-stock deal worth about $1.38 billion and financed in part with new private-equity debt,” according to USA Today.
GateHouse is the largest owner of daily newspapers in the country with 156 dailies, mostly in small markets, as well as 328 weeklies. Gannett, which owns 109 daily papers across the country, has the largest circulation of any American newspaper chain. Between them, the two companies publish one out of every six daily newspapers in the country, with a combined daily print circulation of approximately 8.7 million.
The combined holdings of the merged companies will create a concentration of media control unprecedented in American history.
“We believe this transaction will create value for our shareholders, greater opportunities for our employees, and a stronger future for journalism,” Mike Reed, CEO of GateHouse’s parent company, New Media Investment Group, said in a statement.
The two companies estimate they “can save $275 million to $300 million in annual costs within 24 months,” according to USA Today.
GateHouse is a holding company for New Media Investment Group, which is controlled by Fortress Investment Group, a New York City-based investment management firm. Fortress is owned by SoftBank, a Japanese holding company, best known for its ownership stakes in tech companies. It has spent more than $1 billion since 2014 to acquire newspaper groups in small markets. In Iowa, it currently owns two daily newspapers (the Ames Tribune and The Hawk Eye in Burlington) and five weeklies (the Boone News-Republican, Dallas County News, Hamburg Reporter, Nevada Journal and Perry Chief).
The Register and the Press-Citizen are the only Iowa newspapers Gannett owns.
GateHouse has pursued an aggressive strategy of consolidation with the newspapers it owns. The most recent example occurred in May, when GateHouse consolidated 50 Massachusetts newspapers into just 18. A leaked memo from GateHouse executives said “this consolidation will reduce production expenses and represents a necessary next step in our evolution, while creating a stronger product for both our subscribers and advertisers.”
In his Monday statement on the purchase agreement, Reed said, “We believe this transaction will create value for our shareholders, greater opportunities for our employees, and a stronger future for journalism.”
The agreement calls for GateHouse/New Media shareholders to control 50.5 percent of the merged company, while Gannett shareholders will own 49.5 percent.
Last month, the New York Post reported that three private equity firms that have ownership stakes in both Gannett and New Media were pushing for the deal to be completed. “Private equity firm Blackrock holds a 14.64-percent stake in each company,” according to the Post. “Vanguard Group holds 11.64 percent of Gannett and 10.09 of New Media; while Dimensional Fund Advisors holds 8.23 percent of Gannett and 7.33 percent of New Media.”
The Post said at the time that one of the biggest remaining obstacles to the deal “involves GateHouse/New Media’s assumption of Gannett’s costly pension liabilities.”
USA Today did not report on how that issue had been resolved.