Hedge fund-backed media group GateHouse is set to acquire Detroit Free Press parent Gannett in a deal the companies say will save hundreds of millions in duplicate costs, but could mean layoffs at their papers around the country.
The $1.4 billion deal, set to close late this year, will merge the country's two biggest newspaper chains, creating a media behemoth that controls more than 600 daily and other papers for a total circulation of more than 9 million. The companies said Monday that the merger would free up money for the combined operation to grow its digital product. Analysts said it could also attract more national advertising.
Free Press management was meeting with staff late Monday afternoon. The paper earlier this year went through a round of buyouts as part of a company-wide cost cutting move by Gannett.
A Monday memo sent to employees by Gannett and acquired by the Washington Post hinted at possible layoffs.
The memo said Gannett expects there will be “some duplication and overlap in roles” and that in coming months, executives will review “how the operations of our organizations will come together.”
In a statement to Gannett's USA Today, Michael Reed, CEO of GateHouse parent New Media Investment Group, said the "transaction" is expected to "create value for our shareholders, greater opportunities for our employees, and a stronger future for journalism."
In addition to the Free Press, Gannett owns the Battle Creek Enquirer, Lansing State Journal, the Observer and Eccentric Newspapers, and The Times Herald in Port Huron. The business side of the Detroit News is in a partnership with Gannett, though it was not immediately clear if that daily would be impacted by the merger.
GateHouse, meanwhile, has at least 11 daily and other papers in smaller Michigan cities. It too instituted layoffs across its portfolio this year.
Penelope Abernathy, a professor at the University of North Carolina and author of the report “The Expanding News Desert,” told the Wall Street Journal the merger would likely mean layoffs around the country.
“Based on how GateHouse has managed newspapers it has acquired recently, a merger between Gannett and GateHouse Media will most likely lead to several rounds of layoffs of editors and reporters,” Ms. Abernathy said. “This means there will be fewer people to write the routine stories that are the traditional fare of local newspapers, and fewer investigative pieces.”
Jane Hall, a journalism and media professor at American University, told the Washington Post she "worried about the viability of local newspapers whose parent companies respond to stockholders’ wishes, even at the risk letting competitive journalism slip by the wayside."
“The business model is under duress, and the urge to consolidate and the pressure to consolidate and only look at the bottom line in a very short-sided way is growing,” Hall said. “I find this depressing.”
The combined companies will still be called Gannett. GateHouse Media shareholders will get majority ownership. As part of the new business arrangement, Paul Bascobert, a media executive, was named Gannett CEO.