USA TODAY owner Gannett is reportedly in advanced talks to combine with rival newspaper chain GateHouse Media.
Under terms of the proposed deal, GateHouse would merge operations with Gannett, according to reports in the Wall Street Journal and the New York Post. The value of a potential deal could not be learned.
Reports had emerged in May that the two companies held discussions about a combination.
Gannett declined to comment Thursday, and a GateHouse spokeswoman did not return messages seeking comment.
“As is our practice, we do not comment on market speculation and rumors,” said Barbara Wall, Gannett’s interim chief operating officer, in an email Thursday to Gannett staff.
Douglas Arthur, a stock analyst with Huber Research Partners who tracks Gannett, said in an email that “it would not shock me” if the deal came to fruition since “both stocks have been under pressure” and Gannett has not named a CEO since the retirement of Robert Dickey in May.
“It makes some sense,” he said.
GateHouse Media is part of New Media Investment Group, which is overseen by investment management firm Fortress Investment Group LLC. Fortress is owned by Japanese tech giant SoftBank. The company has 156 daily publications, including the Austin American-Statesman and the Oklahoman, as well as numerous smaller newspapers.
In addition to USA TODAY, Gannett owns more than 100 local news operations in the United States, including the Detroit Free Press, Arizona Republic, Indianapolis Star and Milwaukee Journal Sentinel. The publications share journalism efforts through the USA TODAY Network.
Gannett, which recently spurned a takeover attempt by hedge fund-owned MNG Enterprises, is said to have considered other deals, including a tie-up with Tribune Publishing Co.
Gannett shareholders voted to reject MNG’s nominees to the company’s board.
The Wall Street Journal reported that Gannett and GateHouse were drawn to each other by the chance to bolster their digital advertising and by the prospect of savings, including likely layoffs and the consolidation of printing presses.
“Given the challenges facing local newspapers, this deal, near-term, is far more logical (strategically, culturally and financially) than either of the two previously-considered transactions discussed earlier this year – the buyout offer from Digital First Media or the potential combination with Tribune Publishing,” Chuck DelGrande, a Chicago-based managing director in the tech, media and telecommunications group of investment bank Alantra, said in an email.
DelGrande said the similarities between the two companies’ businesses are clear and the opportunity for savings is real. Both companies “have grown and succeeded, even in the challenging macro environment for newspapers in the digital age, by continuing to be relevant in local news, an area where readership remains viable,” he said.
After closing at $7.90 on Thursday, Gannett’s stock price jumped more than 7% to $8.49 in after-hours trading. New Media Investment Group shares rose 3.1% to $9.35.
The traditional media industry has been under pressure for years due to the sharp decline in print advertising.
Gannett has responded by implementing cost cuts and adding digital advertising and marketing assets. But the company remains under pressure to continue to diversify its business and mitigate the impact of print revenue losses.
The Wall Street Journal reported that GateHouse Chairman and CEO Mike Reed would take on both roles with the combined company. Gannett has been without a CEO since Dickey’s exit.
The fact that the GateHouse owner’s operator, Fortress Investment Group, is part of SoftBank could point to the possibility of “patient capital” that the media companies need to transform into a digital powerhouse, DelGrande said.
“Just as hope springs eternal from those of us that believe in the importance of a viable free press, my hope is that this transaction is the ‘deal that gets done’ and provides the framework for an enduring ‘hybrid’ business model, both off and online,” he said.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
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