GateHouse, Gannett join, become largest U.S. newspaper chain

GateHouse closed its $1.1 billion takeover of USA Today publisher Gannett on Tuesday, becoming the country’s largest newspaper company by far and pledging significant cost cuts at a time when print publications are in precipitous decline.

The merger brings together about 260 daily papers, including the Arizona Republic, the Providence Journal and the Austin American-Statesman, as well as hundreds of weeklies.

The merger affects a dozen newspapers in Indiana. Gannett owns The Indianapolis Star, Journal and Courier in Lafayette, Star Press of Muncie, Palladium-Item of  Richmond and Evansville Courier & Press. GateHouse owns the South Bend Tribune, Times Mail of Bedford, Evening World of Spencer, Herald-Times of Bloomington, Hoosier Topics of Cloverdale, Reporter-Times of Martinsville and Mooresville-Decatur Times.

In an interview with The Associated Press, executives of the combined company, which will keep the Gannett name, acknowledged there will be layoffs—the company has committed to cutting $300 million in annual costs.

Current Gannett CEO Paul Bascobert said front-line reporters are “the last place we want to touch” when it comes to job cuts. He cited “duplication of management” and potential excess costs in financial, printing and advertising divisions as opportunities to reduce costs, and said the company will further centralize editing and newspaper and web design functions.

Mike Reed, the media veteran who leads GateHouse’s parent company, will be CEO of the newly combined company. Bascobert, who has a background in e-commerce as well as media, will now serve as chief executive of the new company’s operating subsidiary.

“We believe we have a strategy that will result in …not just preserving local journalism, but letting local journalism thrive,” Reed said. “National journalism as well. And fortunately, we’re going to be able to impact at least 260 communities.”

The company expects growth in digital operations even as print advertising declines and traditional online ads continue to be dominated by Facebook and Google. The executives envision a revitalization of the classified advertising model on newspaper websites that could offer an alternative to Yelp in helping readers find local businesses

The new Gannett has set itself a challenging task in supporting local journalism by expanding a digital business involving marketing services and online subscriptions, as well as live events. Digital today makes up about a quarter of the two companies’ combined revenues.

Additionally, there’s a high-interest $1.8 billion loan to be paid back to private-equity firm Apollo. The stock price of GateHouse’s parent, New Media Investment Group, has also fallen 40% since it announced the Gannett acquisition, shaving about $265 million from its market value.

Bascobert declined to give an estimate on how many layoffs were coming. The two companies have about 25,000 employees, said a Gannett spokeswoman, down from 27,600 at the end of last year. The company has laid off some workers since then, although it has not specified where those job cuts landed or how many jobs were involved.

Gannett expects to slow its revenue decline. According to predictions in financial filings, the combined company’s revenue will drop 3.6% next year and less every subsequent year until 2023, when it will grow less than 1%. That would be a big turnaround: The old Gannett’s revenue fell 9.5% over the last nine months. Excluding the impact of acquisitions, GateHouse’s fell about 7%.

Reed said digital businesses will grow even as print advertising shrinks from 29% of total revenue in 2019 to 15% in 2022.