Projo’s Parent Co. GateHouse and Gannett Close to Finalizing Merger Deal, According to WSJ

Projo’s Parent Co. GateHouse and Gannett Close to Finalizing Merger Deal, According to WSJ

The Providence Journal's parent company GateHouse Media is moving closer to a merger deal with Gannett. Both companies have been racking up losses and their stocks are trading near 52-week lows.

The media deal would combine two of the largest newspaper groups in the United States and combined 265 daily newspapers and more than 1,000 weeklies and niche publications.

“The companies are grappling with a brutal environment for local newspapers around the country. Private-equity-backed GateHouse has a reputation for aggressively slashing expenses at titles it acquires. Local papers have suffered particularly sharp declines in circulation compared to national outlets as readers look elsewhere for news and classified ads disappear,” writes the Wall Street Journal.

GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST

According to a study by the University of North Carolina released in October 2018, about 1,800 newspapers closed between 2004 and 2018. The result is more than leaving 200 counties in the U.S. are without a paper and roughly half the counties in the country with only one. In Rhode Island, the Providence Journal, now has a circulation of less than 34,000 and its newsroom has been slashed from more than 300 in the 1980s to fewer than 15 news reporters.

According to Ken Doctor, leading media analyst, the deal is complicated by the interwoven GateHouse ownership structure which leads all the way to Tokyo, Japan.

“Fortress Investment Group, which manages New Media/GateHouse by contract, will play a still-being-worked-out role in the transaction. Currently, Fortress takes an annual management fee out of the operation. In 2018, it took out $21.8 million in total — based on a basic management fee of $10.7 million and the rest an incentive payout based on GateHouse’s net income,” writes Doctor.

“Will Fortress continue to play a role in a merged company? Gannett’s board is unlikely to feel comfortable with that, and that’s one of the issues still to be tackled. According to its management contract, Fortress can be bought out of its agreement. That, though, will cost one year’s fee, or about another $10.7 million (in addition to whatever it’s earning for calendar 2019) and an additional buyout of its incentive fee,” Doctor adds.

Just to recap the ownership:

Providence Journal is owned by GateHouse Media.

GateHouse Media is owned by the publicly-traded company New Media Investment.

New Media Investment is managed by Fortress Investment Group.

Fortress Investment Group is owned by SoftBank of Tokyo.

Slashing and Consolidation

Cuts are now rampant in the newspaper industry.

In June, it was announced by the parent company of the Providence Journal and the Newport Daily News that 50 community newspapers in New England will be merged into just 18 -- 32 papers would no longer exist.

The announcement was made by the Providence Journal’s publisher Peter Meyer and fellow GateHouse executive Lisa Strattan.

“Our readers will continue to receive the same in-depth local news coverage of their town plus additional reporting from nearby communities giving them up-to-date news on what’s happening in their region. Our advertisers will receive increased print market reach, simplified buy execution and enhanced digital opportunities,” writes Meyer and Strattan.

In May, it was announced that the Valley Breeze, one of the last locally owned media companies in Rhode Island, has been sold to a Virginia-based newspaper company run by a former top executive with GateHouse Media.

The paper was bought by Richard Whippen’s Whip It Media.

This slashing is consistent with the entire industry nationally.

Pew Research reported last week, “The number of newspaper newsroom employees dropped by 47% between 2008 and 2018, from about 71,000 workers to 38,000.”

“The dramatic decline in newspaper employment also means that the industry now accounts for a smaller portion of overall newsroom employment across the five sectors [newspaper, digital, radio, broadcast TV, and cable TV]. In 2008, newspaper newsroom employees made up about six-in-ten (62%) of all newsroom employees in these five industries. By 2018, they made up fewer than half (44%),” reports Pew.