The Gannett Co., which owns the Tennessean in Nashville and three other newspapers in Tennessee, is buying Journal Media Group Inc., which owns the Knoxville News-Sentinel, the Memphis Commercial Appeal and 12 other daily newspapers.
Gannett, which owns 92 newspapers, including USA Today and those in Nashville, Murfreesboro, Jackson and Clarksville in Tennessee, said Wednesday night it will pay $280 million to acquire the Milwaukee, Wis.-based Journal Media. The merger will give Gannett ownership of six daily newspapers in Tennessee, including the state's three biggest papers, and extend its Midsouth footprint from Arkansas through Kentucky and Tennessee to western North Carolina.
Industry experts say the publications are a natural fit for Gannett's strategy of maximizing short-term profits through managing the decline of publications in less competitive markets.
Gannett's "prevailing strategy is economy of scale," which involves reducing local costs and consolidating or regionalizing many operations, analyst Ken Doctor said.
"Undoubtedly, there will be some (layoffs) in any areas that can be centralized," including technology, newsrooms, human resources, finance and some advertising, he said.
Gannett estimates that the merger should save the combined company $25 million over the next two years from "consolidation of corporate and administrative operations, integration with the Gannett shared service centers and consolidation of certain printing and distribution assets in multiple adjacent markets."
"Our merger will combine the best of each of our organizations to create a journalism-led, investor-focused company which will provide substantial value to the shareholders of both companies," Gannett CEO Robert J. Dickey said in a statement. "This transaction is an excellent first step in the industry consolidation strategy we have communicated to our shareholders and is a good example of the value-creating opportunities we believe are available."
Under the terms of the transaction, which was unanimously approved by the boards of directors of both companies and is subject to Journal Media Group shareholder approval, Journal Media shareholders will receive cash of $12 per share. Based on the closing price of Journal Media Group Wednesday, the purchase price represents a premium of 44.6 percent.
Gannett will finance the transaction through a combination of cash on hand and borrowings under Gannett's $500 million revolving credit facility.
Gannett this summer became a company that runs newspapers exclusively, having moved all of its television companies into a separate company, Tenga Inc.
Journal Media was created in April when the E.W. Scripps Company acquired Journal Communications, and spun out the publishing operations of both Scripps and Journal into a new company.
Tim Stautberg, president and chief executive officer of Journal Media Group, said the merger with Gannett "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."
"We'll be better stewards in our local markets by sharing ideas, content and best practices among our new and larger family," he said.