Shareholders of Gannett Co Inc. (NYSE: GCI) and GateHouse Media parent New Media Investment Group Inc (NYSE: NEWM) have approved a merger of the two media companies, creating a massive chain of more than 250 daily newspapers.
Shareholders in separate votes approved the plan for GateHouse to buy Gannett in a $1.2 billion stock and cash deal, following a promise by management to quickly find a way to cut spending by $300 million. That will be important for paying off a $1.8 billion loan to New Media from private equity firm Apollo Global Management to help make the deal work, Gannett's flagship paper USA Today reported.
The new company will also immediately be under the same pressure as all legacy print news publishers - offsetting the loss of print advertising dollars as the industry tries to shift to digital. Both companies have seen success recently in adding digital subscribers, considered key to replacing the lost print ad revenue.
What It Means
The merger unites two publishers who will have a huge number of daily and weekly newspapers across the country. In addition to USA Today, major papers in the chain will include the Arizona Republic, the Detroit Free Press, the Tennesseean and the Indianapolis Star.
New Media owns 152 dailies, including The Palm Beach Post, The Columbus Dispatch and the Austin American-Statesman, as well as more than 280 weekly newspapers. In all, the companies say their average monthly online audience will be more than 145 million unique visitors.
"Together, we will be stronger, with a more viable path to growth for our shareholders and employees, while sustaining journalism in hundreds of markets across the country and enhancing the services we provide to small and midsized businesses nationally," said Michael Reed, Chairman and CEO of New Media.
The deal is expected to close Nov. 19. The combined company will be called Gannett. Its CEO, Paul Bascobert, will head the new company.
New Media shareholders will own 50.5% of the new company, while Gannett's will hold 49.5%. The combined company will be based in McLean, Virginia outside Washington, D.C.
Shares of New Media were down 1.72% Thursday afternoon, trading at $6.56, while Gannett stock was down 0.36% at $9.80.