Wisconsin newsrooms brace for GateHouse/Gannett merger

As a shareholder vote approaches in three and a half weeks, the pending deal that would make Wisconsin’s largest daily newspaper part of the single largest newspaper chain in U.S. history looks like it’s stumbling toward the finish line.

And while the two companies, GateHouse and Gannett, have already been cutting employees, observers expect that will continue if the combined operation is to meet its objective of cutting $300 million.

“Never before in U.S. history have we seen a single company own and manage so much of the American newspaper business — about one of every six dailies,” news business analyst Ken Doctor wrote earlier this month in his Newsonomics column for Nieman Lab.

Grim uncertainty about what lies on the other side overshadows everything about the deal.

At the Milwaukee Journal Sentinel, the state’s largest newspaper and the largest of Gannett’s 11 daily newspapers in Wisconsin, reporters and editors are bracing for the merger and what comes next.

“We are waiting to see what happens,” said Ashley Luthern, the new president of the News Guild local union representing newsroom employees at the paper. 

“Our newsroom has continued to produce fantastic journalism,” she said. “Our goal as a union has always been to keep a robust staff and provide the news that our readers need, speaking up for our local journalists and advocating for them.”

Gannett’s other Wisconsin dailies are in Appleton, Fond du Lac, Green Bay, Manitowoc, Marshfield, Oshkosh, Sheboygan, Stevens Point, Wausau, and Wisconsin Rapids.

Under the merger agreement, New Media Investment, the owner of GateHouse, will purchase Gannett for about $1.4 billion in cash and stock, financed with a five-year, 11.5% interest loan of $1.8 billion from private equity firm Apollo Global Management.

The new company will take the Gannett name and retain the Gannett headquarters in McLean, Va. New Media shareholders will own 50.5% of the new company; current Gannett shareholders will own 49.5%

Shareholders for both companies are scheduled to vote Nov. 14 on the deal.

The U.S. Justice Department’s antitrust division has already signed off on the transaction. But new obstacles have arisen, although how formidable they’ll actually be remains uncertain.

• Earlier this month, shareholders filed three lawsuits to block the deal until more information about the transaction was provided. The lawsuits allege that company projections that core earnings after the merger would grow to $347 million by 2023 were “materially misleading” because they did not use standard accounting principals and did not describe, as required, how they arrived at the figures.
• According to an Oct. 18 report in the New York Post, the Federal Communications Commission has questioned Apollo Global, the lender, because its deal to buy 13 television stations from Cox Enterprises for $3 billion could conflict with FCC rules that prevent overlapping ownership of a TV station and a newspaper in a single market. Although the FCC originally tried to shed those rules, a federal judge blocked the agency from doing so.

In the more than two-month period since the transaction became official, GateHouse has been especially aggressive cutting staff at papers around the country, according to blog and social media posts from unions representing GateHouse newspaper employees.

Miles Maguire, a journalism professor at the University of Wisconsin-Oshkosh, has said that regional Gannett papers around the state — which include the Oshkosh Northwestern — have endured staff reductions for years. “The cuts have been very dramatic and debilitating,” he said.

Maguire, who contributes to a weekly print publication, the Oshkosh Herald, founded by a former Northwestern staff member, says the Gannett paper appears to him to be slow in covering unfolding stories. 

“On almost any beat that you could name, there are stories that are not getting covered or are being covered very slowly,” he said.

Both Maguire and Lew Friedland, a UW-Madison journalism school professor whose own study focuses on “communication ecologies” and how local news and newspapers affect the flow of information through communities, question whether the FCC wrinkle will actually have any impact on the merger. 

And both expect cuts to continue.

“I have students who work in Appleton and Oshkosh” — both cities with Gannett-owned papers — “and they tell me it’s nothing but cuts there. People are effectively doing two-and-a-half jobs,” Friedland said. 

“If this merger goes through, they will be cutting staff and consolidating reporting even further, which is hard to imagine in Wisconsin,” he continued. “After these mergers they never invest in news-gathering capacity. It’s always cut, cut, cut.”

Friedland is convinced that the Journal Media Group — the newspaper company formed when Journal Communications combined with Scripps Howard, then separated into broadcast and print companies — didn’t need to sell to Gannett in 2016. And he believes the Journal Sentinel  would have been better off if it hadn’t — earning a modest profit from its niche.

“There are still some great journalists there and great editors,” he said. “I have a lot of respect for that paper and its management. But the act of selling it to Gannett was a big mistake.”

The primary argument for the GateHouse-Gannett merger, Friedland said, is that with Gannett’s financial difficulties, which are shared across the newspaper industry, “the merger of the two compaies will provide greater value.” 

But that, he added, means value for shareholders of the publicly held companies.“That doesn’t consider the public interest. Wisconsin needs newspapers. All communities need newspapers. We’re going to get fewer, and poorer, of them out of this merger.”