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March 28, 2024

Gannett Joins the 100 club with Purchase of 15 More Dailies

Gannett may be struggling along with its peers, but it’s doubling down on the newspaper business.

Today, the largest U.S. newspaper company by revenues (and second-largest globally, to News Corp.) bought 15 more dailies from the Journal Media Company. The price: $280 million, which represents a 45-percent-plus premium over the company’s market cap. Strategically, it marks a more greatly scaled push to profitably manage the decline of the local newspaper industry across North America.

If Journal Media isn’t a household name, that may be because it is a company that it less than one year old. In mid-2014, Milwaukee’s Journal Communications—then owner of the Journal Sentinel and related TV and radio properties—first announced its merger with E.W. Scripps. At the same time, the companies said the new firm would split into separate newspaper (Journal Media) and broadcast (E.W. Scripps) companies. Newspaper companies have almost all sequestered print and broadcast assets in the past three years. Such separations have in turn led to more roll-ups in both the print-centric and broadcast businesses. This deal followed along those lines. That split happened on April 1.

The acquisition puts Gannett into the 100 club. It will operate 105 daily operations throughout the country, owning about one-seventh of the nation’s daily newspapers. New Media Investment Group/Gatehouse also resides in that club, with 126 properties. In revenue, though, it’s a much smaller company, with a self-counted reach of 19 million people to Gannett’s self-counted (pre-Journal Media buy) reach of 112 million.

 

First published at Politico Media

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The acquisition isn’t a surprise. Gannett itself split from its combined newspaper/broadcast company at the end of June, signaling its intent for acquisition even before the separation was completed. It first traded its equity in Digital First Media for 11 newspapers in the southwest and Pennsylvania in April. Now, this agreement sets it up for 2016, fitting its evolving strategies.

Gannett, like its chain peers, has moved strongly to consolidate whatever operations it can nationally and regionally. Former USA Today Publisher Larry Kramer laid down an important pillar of that strategy, as Gannett’s USAT national flagship began producing national sections and pages for its community papers.

Those products, produced outside Washington, D.C., but printed locally, save lots of local expense. The idea: Have the local newsrooms focus their resources almost exclusively on local news and use the company’s own national news/sports/business/lifestyle product as an insert. That’s a program that has both wrung out cost and received good audience reception, the company says.

In addition, Gannett has honed consolidation strategies in advertising, finance and human resources, to cut expenses as print ad revenues still approach double-digit decline. For the second quarter, Gannett reported a decline of 8.7 percent in operating revenues. EBITDA dropped 28 percent to $97 million compared to $125.3 million.

In buying the Journal Media properties, Gannett takes on 15 daily operations experiencing similar issues. For the second quarter, Journal Media announced an 11 percent drop in revenue. The culprit? A stunning 13 percent decline in advertising and marketing services. Circulation revenues also declined by six percent.

Overall, Gannett CEO Bob Dickey places immediate savings from synergies, at $10 million and estimates another $25 million over the next two years. Added adjusted EBITDA, in total, will be about $60 million, says Dickey.

Within the Gannett strategy, we can also see a further drive: clustering, or the buying up of properties contiguous to its current holdings. For instance, in prosperous southwest Florida, it adds the still ad-thicker Naples Daily News to its neighboring Fort Myers News-Press. In Tennessee, it picks up the Memphis Commercial Appeal and Knoxville News-Sentinel, while already owning the Tennessean in Nashville, offering more operational synergies.

In all, 2015 is proving to be a year of more newspaper consolidation, as once-independent papers like the Milwaukee Journal-Sentinel and Columbus Dispatch, the latter bought by New Media Investment Group in June, go to big chain ownership. Given the nature of numbers, such acquisitions, driven strongly by a managing decline philosophy, will likely continue into the new year.

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