Shareholders paved the way for Thursday for New Media Investment Group and US TODAY owner Gannett to merge into a deal that will create the largest US media company in print, and one that will also fight for the largest news audience on the web .
In separate votes, shareholders in each company approved New Media's $ 1
The combined company will be called Gannett and will own more than 260 daily publications, as well as hundreds of weekdays. The new company will reach an average monthly online audience of more than 145 million unique visitors, according to traffic measurement company Comscore.
The agreement "provides us with a much broader platform to build our digital businesses and to help each of these local markets grow for us from a digital perspective," Gannett CEO Paul Bascobert said Thursday at the company's shareholders meeting, where the poll results were revealed. "Our commitment to building these brands is even stronger than ever."
The company's financial success will depend on its ability to throw overlapping costs and achieve what it calls a "digital transformation" based on increased revenues from digital products and marketing services. The new Gannett aims to cut $ 275 million to $ 300 million in costs per year over 18 to 24 months in a variety of areas, including facilities, corporate functions and news operations.
Analysts are divided about whether the company can make the savings, which is crucial to paying down a $ 1.8 billion loan New Media received from private equity firm Apollo Global Management to help fund the deal.
"I think $ 300 million is a low figure" for the cost cutters, said media analyst Newsonomics Ken It said the doctor. "The number is going to be higher."
Doug Arthur, an analyst at Huber Research Partners in Connecticut, estimates cost savings of $ 245 million annually from the third year of the new company.
"You'll definitely get some economies of scale" and "a lot of business office savings" and print jobs, he said. But he does not think the company will achieve its cost-cutting target.
New Media CEO Mike Reed, who will become CEO of the new Gannett, told investors Oct. 31 that "we feel good about the synergies."  "We have been working hard on integration planning, and we are now even more confident in our ability to realize the high end of the savings area and during the 18- to 24-month period we previously stated," he said.
Gannett's current CEO, Bascobert, will retain that title as chief of the new company's operating subsidiary, also called Gannett. He has said he is confident of hitting the savings target.
It is crucial because the Apollo loan at an interest rate of 11.5% can become burdensome if it is not paid quickly, said Tim Hynes, head of North American debt analysis research. service Debtwire.
"The whole goal is to get rid of it," he said.
Under the agreement, Apollo has the right to appoint two observers to the company's board of directors and may appoint one or two voting directors if the company's debt exceeds revenue by a large margin.
"If it turns out that the management team is not meeting their plans, they will be more confident as time goes on," Hynes said of Apollo.
But Apollo believes that the new Gannett can afford to pay the debt on time or potentially early with no down payment, according to people with knowledge of the Apollo Financing Agreement who spoke on condition of anonymity because they were not authorized to speak publicly.
In addition to its national presence through the United States TODAY, the new Gannett will operate news organizations in 47 states and Guam, as well as the United Kingdom.
"The combined operations will have a wide local-to-national network of incredibly talented, experienced journalists who can continue to deliver uniquely award-winning content to both local communities and national audiences," Bascobert told investors in a conference call Nov. 4.
For the new Gannett, the main challenge will be to counteract the continued pressure decline with digital revenue.
In recent years, Gannett has followed a unified journalism and business strategy through the marketing of the United States TODAY Network, which includes all United States publications. Under that brand, the company has won several Pulitzer Prizes, expanded investigative reporting and shared resources on journalism. New Media, which operates as Gatehouse Media, has also expanded its investigative reporting team.
Gannett and New Media have reduced costs and made a number of acquisitions in recent years to boost revenue and scale.
But financial challenges in the industry have proven to be an obstacle to Gannett's quest to redo himself, digital advertising and consumer revenue have been less lucrative than print.
On their own, New Media and Gannett have been successful in adding subscriptions to the Internet, which is seen as the key to replacing lost print revenue. In the third quarter, Gannett's digital subscription rose 27% to 607,000, compared to the same period a year earlier, while New Media rose 65% to 217,000 over the same stretch.
Building these subscription bases will require investment in journalism, said Michael Silberman, senior vice president of strategy at subscription trading and technology provider Piano, who considers New Media as a client.
"Much of the focus during the first few days will be on integration and cost savings, and the key to success will be how much of the cost savings they are able to eventually plow back into the product itself and serve the local communities," says Silberman, a former general manager of digital media at New York Media, the parent company of New York magazine. He said the question from a subscription point of view is whether these investments are enough to create "news that is worth paying for."
In addition to the United States TODAY, Gannett owns 109 local media properties operated as the United States TODAY Network – including the Arizona Republic, Detroit Free Press, Milwaukee Journal Sentinel and Indianapolis Star – as well as UK-based Newsquest Media Group and digital marketing tools such as WordStream.
New Media owns 152 daily publications – including The Palm Beach Post, The Columbus Dispatch, The Oklahoman and Austin American-Statesman – as well as 284 weekly newspapers operating as GateHouse Media and digital marketing tools such as ThriveHive.
Together, the new company's publications and digital marketing services will be under pressure to curb revenue decline. Arthur said he believes the overall company's revenue projections are "overly optimistic" due to the continued decline in print.
"I don't think this is going to be a set up," he said.
But one area for growth is events where New Media has a particularly strong business, said the doctor. Another is digital marketing services, where Gannett's recently appointed CEO, Bascobert, develops a strategy for growth.
Doctor said that Gannett's success with developing the United States TODAY Network, which shares journalism resources and national ads, is also key.  "In digital form, the United States TODAY Network is one of the reasons for making this deal," the doctor said. "They are on a sufficient scale to run a good amount of digital national business, and the GateHouse features added there give them more scale."
New Media shareholders will own 50.5% of the total company, while Gannett shareholders will own 49.5%. The company will be based at Gannett's headquarters in McLean, Virginia.
Gannett had around 16,980 employees at the end of 2018, while GateHouse had about 10,638 employees, according to their securities filings.
The new nine-person Gannett board will consist of Reed plus five appointed New Media employees and three appointed by Gannett.
As part of the combination, New Media Investment Group's operator, Fortress Investment Group, will continue to operate the combined company. Fortress, owned by Japanese conglomerate SoftBank, negotiated a fee fee to step aside in late 2021.
Exact votes were not immediately available, but New Media CEO Mike Reed said about 99% of the 75% of New Media Shareholders who voted approved the deal.
At least 82% of Gannett's shares were voted in for the deal, said Gannett Chairman J. Jeffry Louis.
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