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New Media (NEWM) is all Set to Bring Gannett Under its Wings

Zacks Equity Research

Shareholders of New Media Investment Group Inc. NEWM have given a nod to the proposed acquisition of Gannett Co., Inc. GCI. The deal, which was initially announced on Aug 05, 2019, will create a major publishing company as well as bring some of the leading newspapers and weeklies in the United States under one roof.

Per the terms, Gannett will be acquired by New Media through a combination of cash and stock. Per sources, the merged company will carry the name — Gannett. The deal marks an important milestone in the publishing industry’s timeline as it will create a major entity, owing more than 250 newspapers and other publications. The merged company will boast renowned banners like USA Today, The Arizona Republic, The Austin American-Statesman and the Palm Beach Post. Many of these publications have widespread local and national reach.

Experts have opined that the combined firm will have print circulation that will exceed more than eight million. Moreover, the companies had initially projected that the deal will lead to annual cost savings of up to $300 million. Although the companies have not stated how the targeted savings will be achieved, it is expected to include strategies like reducing employee count. Further, management of both the companies expect that the combination of resources will bolster journalism capabilities.

Although the deal highlights growth prospects, there are certain downsides that cannot easily be ignored.  We note that the publishing industry is reeling under declining demand for print media. Markedly, Gannett's total operating revenues declined 10.7% year on year, when it reported third-quarter 2019 results. The downside was caused by weakness in its publishing segment. Also, total revenues of New Media dipped 1% when it reported third-quarter numbers.

Nevertheless, companies in the publishing space are relying on digital media to stay afloat. In fact, revenues from digital offerings for Gannett and New Media increased when they reported their respective third-quarter 2019 results. The merger of these two entities is likely to enrich the scope for digitalization. In fact, the companies believe in the shared notion that digital transformation is vital for the preservation of quality journalism in the newspaper industry. Other publishing companies such as The New York Times Company NYT and The McClatchy Company MNI are also trying to bolster their presence in the digital realm.

All said, let’s wait and see if Gannett’s merger with New Media turns out to be lucrative. The deal is likely to close on Nov 19.

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McClatchy Company (The) (MNI) : Free Stock Analysis Report
 
The New York Times Company (NYT) : Free Stock Analysis Report
 
Gannett Co., Inc. (GCI) : Free Stock Analysis Report
 
New Media Investment Group Inc. (NEWM) : Free Stock Analysis Report
 
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