Two of the country’s largest newspaper companies are joining forces to create a mega-conglomerate that will operate more than 260 daily news operations.
Gannett and GateHouse Media will merge in a cash-and-stock deal valued just shy of $1.4 billion. The company will remain based at Gannett’s DC headquarters, as well as keeping the name, but shareholders from New Media Investment Group—the parent of GateHouse—will own a majority interest in the combined company.
Together, the two companies publish papers in all but a few states. In Pennsylvania, outlets will include the Gannett-owned Lebanon Daily News and York Daily Record, as well as the GateHouse-owned Pocono Record, Wayne Independent, and Erie Times-News.
The two companies currently employ about 30,000 people overall.
New Media Investment Group is operated by its part-owner, SoftBank, through subsidiary Fortress Investment Group, which will continue to run the company through 2021.
The deal is pending regulatory approval.
Industry analysts expect the combined company will realize $200-300 million in annual savings by consolidating finance, HR, and technology divisions, as well as right-sizing printing and distribution facilities.
“We believe this transaction will create value for our shareholders, greater opportunities for our employees, and a stronger future for journalisms,” said Michael Reed, New Media Chairman and Chief Executive Officer in a press release.
Consolidation is expected to continue in the local newspaper industry as legacy companies face seemingly insurmountable financial challenges in transitioning to digital-based business models.
Earlier this year, Gannett had been subject to a takeover threat from Media News Group/Digital First Media, which it fended off. At the time, Jim Friedlich, director of the Philadelphia-based Lenfest Institute for Journalism, quipped to the Wall Street Journal that, “This is the lumber company trying to buy the national park.”
Read More: Gerry Lenfest’s link to Lebanon
In June, Media News Group acquired the Reading Eagle in a deal that culminated with 81 staffers laid off.
As longtime newspaper industry columnist Ken Doctor notes in his column on the transaction, “The merger of GateHouse and Gannett is not the checkered flag at the end of the race. It’s more of a starting gun.”