Gannett, the publishing company that owns USA TODAY and media businesses in 92 local markets, said late Wednesday that it has agreed to buy Journal Media Group for about $280 million, following through on a strategy of acquiring additional local news outlets after it was spun off from its former parent in June.
Shareholders of Milwaukee-based Journal Media Group will receive $12 a share in cash. That is a 45% premium from the Wednesday closing price of $8.30.
Journal Media Group (JMG) owns the 178-year-old Milwaukee Journal Sentinel, The Commercial Appeal of Memphis, 15 other daily newspapers, 18 weeklies and their affiliated websites in 14 U.S. markets.
The deal is expected to close in the first quarter of 2016. It was approved by both companies’ boards of directors and is subject to approval from Journal Media Group shareholders.
Shares of Gannett closed at $14.94, up almost 4%.
“Just over 100 days ago we laid out the importance of expanding our local market footprint, and we are very pleased that our acquisition strategy has kicked off with such a highly regarded company.”
Robert Dickey, Gannett
Gannett (GCI), based in McLean, Va., will finance the deal through cash and borrowing under the company’s $500 million revolving credit line.
“Gannett is excited to be joining forces with an organization that is so respected by their communities and industry,” Gannett Chief Executive Robert Dickey said. “Just over 100 days ago we laid out the importance of expanding our local market footprint, and we are very pleased that our acquisition strategy has kicked off with such a highly regarded company.
“This transaction will allow us to focus on creating quality journalism for our communities while building substantial value for our shareholders,” he said. “We welcome the employees of the Journal Media Group into the Gannett family and look forward to continuing to be an industry leader.”
After the deal, Gannett will have a media outlet in 106 local markets in the U.S. It will result in “a combined digital audience of more than 100 million unique visitors a month,” the company said. The company’s print circulation will rise by about 675,000 weekdays and 950,000 Sundays.
In late June, Gannett was split from its former parent, now called Tegna (TGNA). Gannett focuses on USA TODAY and local markets, 10 of which are now in Wisconsin.
Tegna, whose former name was Gannett, sought the spinoff to focus mainly on television broadcasting and its digital businesses, Cars.com and CareerBuilder.com.
When the split was announced in August 2014, then-Gannett executives said the new Gannett would begin operating largely without debt and was poised to be an acquirer in an industry ripe for consolidation.
Once the proposed merger with Journal Media Group is completed, the combined company “will benefit from the consolidated functions Gannett has established over the last several years,” Gannett said. For some time, Gannett has been consolidating some internal operations, centralizing newspaper design, copy editing and other functions.
Gannett also said it operates printing and distribution facilities at or near some of the Journal Media Group markets.
“This transaction marks a critical next step in the transformation of our industry as we build local media brands that matter at a time when operational scale is a competitive advantage,” said Tim Stautberg, CEO of Journal Media Group.
The companies didn’t disclose Stautberg’s status after the merger.
Journal Media Group was created following the merger of E.W. Scripps Co. (SSP) and Journal Communications last year. As part of their agreement, they combined Journal and Scripps publishing businesses and spun them off as a separate, publicly traded company. Scripps now operates their combined broadcast assets.
While Journal Media Group’s shares have fallen about 19% since the new company began trading in April, in August it reported that its second quarter revenue rose 26% year over year to $115.8 million as both subscription and advertising sales rose.
It also swung to profitability with net earnings of $3.3 million vs. a loss of $10.5 million a year ago.
Gannett pointed out that the acquisition would add about $450 million to Gannett’s yearly revenue and about $60 million of “adjusted EBITDA,” or earnings before interest, taxes, depreciation and amortization.
Integrating the companies is expected to result in about $10 million in savings with an opportunity for an additional $25 million in the next two years, it said.
Gannett’s potential new dailies
Journal Media Group owns 17 daily newspapers in 14 markets as well as 18 weeklies and three monthly publications. Click on the plus and minus signs to see more details about locations; click on the blue pins to find out paper names and websites.