Shareholders of USA TODAY owner Gannett and New Media Investment Group are poised to determine whether the two companies will combine in a deal that would reshape the media landscape amid a tumultuous transition from print to digital.
On Thursday, stockholders of each company will vote on the proposal for New Media to acquire Gannett. The combined entity would be the biggest U.S. media company by print circulation and could vie for the largest monthly online news audience, nearing top-ranked CNN, according to traffic measurement firm Comscore.
If shareholders vote in favor of the combination, the two companies are expected to close the transaction soon afterward. The new company would take on the Gannett name and headquarters in McLean, Virginia.
Representatives of Gannett and New Media, whose GateHouse Media operating division has more than 150 daily publications, declined to comment.
Doug Arthur, a financial analyst who covers media with Huber Research Partners in Connecticut, said the vote should be “relatively straight forward,” with investors signing off on the deal. But there’s one caveat: Some large investors in New Media appear to have sold off shares earlier this week, he noted.
New Media shares closed at $6.68 on Wednesday, down $2.13, or more than 24%, since ending at $8.81 on Oct. 31. .
“So you kind of wonder which long-term shareholder is selling down here and what does that mean for the vote?” Arthur said.
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Ken Doctor, media analyst at Newsonomics and founder of a new local news venture called Lookout, said he expects the deal to pass.
“It’s not a deal that anybody loves, but it’s a deal that most of the players believe is the best possible one at the moment,” he said.
The companies, which have grappled for years with a decline in newspaper circulation and advertising, believe they will be stronger together. They plan to shed $275 million to $300 million in overlapping costs per year within 18 to 24 months and use their combined power to pursue a “digital transformation” predicated on innovative marketing services, online advertising and paid subscriptions.
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In addition to USA TODAY, Gannett owns 109 local media properties operated as the USA TODAY Network, including the Arizona Republic, Detroit Free Press, Milwaukee Journal Sentinel and Indianapolis Star.
New Media owns 152 daily publications – including The Palm Beach Post, The Columbus Dispatch, The Oklahoman and Austin American-Statesman – as well as 284 weekly newspapers.
Gannett generated revenue of $2.92 billion in 2018, compared with GateHouse’s $1.53 billion. New Media shareholders would own 50.5% of the combined company, while Gannett stockholders would own 49.5%. To finance the deal, New Media is borrowing $1.8 billion from private equity firm Apollo Global Management. Both companies have said they want to pay off the debt quickly.
The cash-and-stock offer for Gannett was worth about $1.38 billion when the companies announced the proposal on August 5. Under the terms of the deal then, shareholders of Gannett would receive $6.25 in cash and 0.5427 of a New Media share for each Gannett share they held, amounting $12.06 per Gannett common share based on New Media’s closing stock price as of Aug. 2.
As of the close trading on Wednesday, the acquisition offer was worth about $1.13 billion.
Gannett shares closed at $9.84 on Wednesday, down from $10.72 on Aug. 5.
Gannett had about 16,980 employees at the end of 2018, while GateHouse had about 10,638 employees, according to their securities filings.
New Media CEO Mike Reed will become CEO of the combined company, while Gannett CEO Paul Bascobert will become CEO of the company’s operating subsidiary.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.