GateHouse Media owner and USA TODAY owner Gannett have agreed to merge in a deal aimed at cutting overlapping costs and enabling the combined company to pursue a digital transformation.
New Media Investment Group announced Monday that it reached a deal to acquire Gannett, which owns more than 100 other daily publications and digital marketing services such as ReachLocal.
Pittsford, New York-based GateHouse, the operating subsidiary of New Media Investment Group, will combine with McLean, Virginia-based Gannett, the larger of the two companies, in a cash-and-stock deal worth about $1.38 billion and financed in part with new private-equity debt.
The combined company will be based at Gannett’s headquarters west of Washington, D.C., and will be called Gannett.
New Media Investment Group CEO Michael Reed will remain CEO of the umbrella company.
Former XO Group President, former Bloomberg LP Chief Operating Officer and former Dow Jones Chief Marketing Officer Paul Bascobert was appointed CEO of Gannett and a member of the Gannett board.
After the acquisition is complete, which is expected to occur around the end of the year, Bascobert will become CEO of the combined Gannett-GateHouse entity, while Reed remains at the top of New Media.
Gannett’s current chief financial officer, Alison Engel, will become CFO of the new Gannett.
The companies estimated they can save $275 million to $300 million in annual costs within 24 months. New Media shareholders will own 50.5% of the combined company, while Gannett shareholders will own 49.5%.
“We believe this transaction will create value for our shareholders, greater opportunities for our employees, and a stronger future for journalism,” Reed said in a statement.
Together, the two companies would operate more than 260 daily news operations – far more than any other U.S. news publisher – and boast potentially the largest online audience of any American news provider.
On their own, each company has grappled with the sharp decline of print revenue caused by the disruptive forces of online news, social media and smartphones.
Those forces will still be in place once the companies merge. Across the industry, newspapers lost about 57% of their advertising and circulation revenue and about 49% of their weekday print circulation from 2000 to 2018, according to the Pew Research Center.
After reports of the potential deal emerged in recent weeks, analysts told USA TODAY that the deal could help give the two companies time to reduce their expenses and secure sufficient digital revenue to maintain significant news operations.
The stakes are high. The fate of for-profit local journalism hangs in the balance as the news industry spars with digital giants Google, Facebook and others for revenue and the attention of Americans.
Gannett had about 16,980 employees at the end of 2018, while GateHouse had about 10,638 employees, according to their securities filings.
Gannett had nearly double as much revenue in 2018 – $2.92 billion, compared with GateHouse’s $1.53 billion – and had about double the market capitalization, as of Friday.
Gannett’s publications include the Detroit Free Press, Arizona Republic, Indianapolis Star and Milwaukee Journal Sentinel. GateHouse’s publications include the Columbus Dispatch in Ohio, Austin American-Statesman in Texas and the Oklahoman.
New Media Investment Group’s operator, Fortress Investment Group, is owned by Japanese conglomerate SoftBank, which is known for its investments in technology companies.
The deal comes about four years after Gannett split from the broadcasting arm of its former parent company, now known as Tegna.
In recent years, Gannett has pursued a unified journalism and business strategy through the promotion of the USA TODAY Network, which includes all of its U.S. publications. Under that brand, the company has won several Pulitzer Prizes, expanded its investigative reporting and shared journalism resources.
But financial turmoil — including the continued loss of print advertising dollars and 2016’s aborted attempt to acquire the media company now known as Tribune Publishing – has proven to be an obstacle in Gannett’s quest to remake itself. The company’s CEO, Robert Dickey, retired in May without a permanent replacement.
Likewise, GateHouse has faced similar challenges. The company has responded to the industry’s revenue decline by making a series of acquisitions to bolster its revenue and gain scale while also shedding costs.
Independently, Gannett and GateHouse have been making progress attracting paid digital subscribers to partially make up for the loss of print subscribers in recent years.
Gannett’s digital-only subscriptions rose 39% year-over-year to 538,000 in the first quarter of 2019.
GateHouse’s digital-only subscriptions rose 44% to 174,000 over the same period.
This story is developing.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.