It’s a go.
Shareholders voted Thursday to approve a deal that would join the two largest newspaper chains in the United States, all but guaranteeing the creation of a newspaper colossus that is likely to result in thousands of layoffs.
The combination of GateHouse Media and Gannett — already the two largest newspaper owners in the country, by both number of papers and print circulation, according to researchers at the University of North Carolina — means that more than 260 dailies and 300 weekly newspapers will be run by the same company.
The merger is expected to reach formal completion Tuesday, the companies said in a statement Thursday. Shareholders with stakes in both companies voted in favor.
Under the terms of the deal, New Media Investment Group, the parent of GateHouse Media, is the company that will acquire its smaller rival, Gannett. The new company will go by the name Gannett and will include Gannett papers like USA Today, The Arizona Republic, The Detroit Free Press and The Kitsap Sun along with GateHouse publications like The Palm Beach Post, The Austin American-Statesman and The Akron Beacon Journal. Their combined print circulation will exceed 8 million, according to the University of North Carolina researchers.
The deal will also lead to annual cost savings of up to $300 million a year, the companies said upon announcing the deal in August. Executives have not specified how the savings would come about while insisting that the deal would “enhance quality journalism.” Job cuts, in newsrooms and other areas, are likely.
Michael Reed, chief executive of New Media Investment Group, was named the head of the new Gannett. “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,” Reed said in a statement.
The president of a union that represents newsroom employees around the country (including at The New York Times) condemned the merger. “The deal is bad for journalists, it’s bad for readers, and it’s bad for the future of local journalism,” the News Guild-CWA president, Bernie Lunzer, said in a statement Thursday. “Local papers will likely vanish, jobs will be slashed, and reporting will suffer.”
The transaction was valued at $1.4 billion in August, but a recent decline in GateHouse stock will make it worth closer to $1.2 billion.
Private-equity firms, flush with capital and able to profit off the steady cash flow produced by legacy dailies, have come to dominate the newspaper industry, which has been in general decline for more than a decade as readers increasingly get their news on laptops, tablets and smartphones. Digital advertising revenue has not made up for the decline in the money once brought in by the print ads that used to fatten newspapers.
Gannett’s business has always been journalism, ever since its founder, Frank Gannett, became a newspaper baron roughly a century ago. In contrast, the money that has allowed GateHouse Media to go on a buying spree in recent years derives from Fortress Investment Group, a New York financial firm that is owned by Japanese conglomerate SoftBank.