Shares of Gannett Co., the publisher that owns The Indianapolis Star, USA Today and more than 100 other newspapers, rose Thursday after The Wall Street Journal reported it has had recent merger talks with Gatehouse Media—a deal that would unite the two largest newspaper chains in the U.S.
Gannett also has discussed deals with Chicago-based Tribune Publishing Co. and Sacramento, California-based McClatchy Co., according to the report, which cited unidentified people familiar with the matter. Gannett and Gatehouse didn’t respond to requests for comment from Bloomberg News.
Such a deal would give the merged company a breathtakingly large Indiana presence. In addition to The Star, McLean, Virginia-based Gannett owns newspapers in Evansville, Lafayette, Muncie and Richmond. Thanks to its January acquisition of Merrillville-based Schurz Communications' publishing division, Pittsford, New York-based Gatehouse owns seven Indiana papers, including The Herald-Times in Bloomington and the South Bend Tribune.
Daily newspaper giants, plagued by diminishing advertising and competition from digital upstarts, are increasingly looking for ways to team up. But Gannett hasn’t welcomed all comers: It spurned a hostile $1.36 billion offer from MNG Enterprises Inc. in February.
MNG—majority-owned by the hedge fund Alden Global—also embarked on a failed campaign to get representation on Gannett’s board. At its annual meeting this month, Gannett shareholders rejected the three directors proposed by MNG.
Employees at Gannett feared that an MNG takeover would bring severe job cuts to the struggling company. Gannett has suffered its own layoffs, but the cuts haven’t gone as deep as those made at MNG, owner of the Denver Post, St. Paul Pioneer Press and other daily newspapers.
Shares of Gannett rose as much as 9% on Thursday, reaching $8.34, before drifting back to $7.81, a gain of 1.6%. New Media Investment Group Inc., which owns Gatehouse, climbed as much as 5%. Before Thursday’s rally, Gannett was down 11% this year.
Citing an unnamed source, media analyst Ken Doctor estimated Thursday that a Gannett-Gatehouse merger would generate $40 million to $50 million in savings from the elimination of "back office duplication."
Doctor has long predicted that daily newspapers' continuing financial struggles would fuel additional rounds of consolidation.
"M&A is only route that offers big short-run savings," he wrote Thursday. "Do any of these publishers have a grand plan to really turn it all around, to make daily publishing once again—after a decline of now more than a decade—a growing business? No."