Gannett to buy Commercial Appeal, Knoxville News Sentinel parent
Gannett, the publishing company that owns The Tennessean, announced late Wednesday that it has agreed to purchase Journal Media Group, which includes The Commercial Appeal in Memphis and the Knoxville News Sentinel, for about $280 million.
This acquisition will mean Gannett will own the major news organizations in three of the four largest cities in Tennessee.
The purchase by Gannett, which also owns USA Today and media businesses in 91 other local markets, follows through on its 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 percent premium from the Wednesday closing price of $8.30.
In addition to its Tennessee media businesses in Memphis and Knoxville, Journal Media Group owns the 178-year old Milwaukee Journal Sentinel, 12 other daily newspapers, 18 weeklies and their affiliated websites in 14 local markets in the U.S.
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 by Journal Media Group shareholders.
Shares of Gannett closed at $14.94, up almost 4 percent.
Gannett, 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," said Gannett CEO Robert Dickey. “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. 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 media outlets 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,” it said. Its print circulation will rise by about 675,000 on weekdays and 950,000 on Sundays, it said.
Gannett's media properties in Tennessee also include The Jackson Sun, The Leaf-Chronicle in Clarksville, The Daily News Journal in Murfreesboro, along with The Dickson Herald, The Ashland City Times, The Robertson County Times, The Gallatin News Examiner, The Hendersonville Star News, The Fairview Observer, Stewart Houston Times and others.
In late June, Gannett was split from its former parent, now called Tegna. Gannett is focusing on USA Today and local markets, 10 of which are currently in Wisconsin. Tegna, whose former name was Gannett, sought the spinoff to mainly focus 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.
TEGNA, Gannett go separate ways as print spin off is completed
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 the Stautberg's status after the merger.
Journal Media Group was created following the merger of E.W. Scripps Co. 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 its shares have fallen about 19 percent since they began trading in April, in August Journal Media Group reported that its second quarter revenue rose 26 percent 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 versus 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 would result in about $10 million of “synergies,” or savings, with an opportunity to for an additional $25 million in the next two years, it said.
Tennessean reporter Jordan Buie and USA Today reporter Roger Yu contributed to this report.