April 6, 2020

Gannett, the nation’s largest newspaper company with 261 daily papers including USA Today, watched its stock plunge further Monday to 65 cents a share at market close.

That’s an abrupt fall, to put it mildly, from the $12.06 GateHouse Media parent New Media Investment offered Aug. 5 as roughly half payment to acquire Gannett (retaining the Gannett name).

Shares had fallen by the time the deal closed Nov. 19, and the overall market had been in steep decline even before the pandemic began. But not nearly steeply enough to send it into penny stock territory.

A similar loss of investor confidence, together with pension funding woes, was a big factor in forcing McClatchy — the second largest, with its 31 papers — to file for Chapter 11 bankruptcy protection Feb. 13. I wouldn’t expect Gannett to follow suit. Apollo Global Capital’s loan (debt taken on by New Media Investment to fund the deal) is for a five year period and, despite the stock plunge, the company is still profitable. And the merged company is just getting started. Barring an apocalyptic scenario, things will get better.

But the news does highlight the huge gulf between Gannett’s plan to take advantage of greater scale for big savings and some new revenue streams and what may be possible now. Gannett is stuck with interest and paydown on the $1.2 billion financing from Apollo.

I don’t think a takeover bid is at all likely either. Who would want an entrée into the industry, paying off Apollo and securing its own financing for the borrowing needed?

Billionaire investor Leon Cooperman pressed Gannett CEO Mike Reed on the point during the company’s last earnings conference call. By Cooperman’s math, Reed was promising the company could be worth five or six times as much in a few years as it is now. How could that possibly be? (And the shares were not doing nearly as badly then).

Reed stuck by an earlier statement that savings and revenue progress is in the works and that Gannett has steadily reduced its reliance on print advertising (now just 29% of total revenue). And, he said, the company is current on its loan obligation to Apollo.

I reached Reed Monday and he declined to say more on the record. Added detail is likely to be forthcoming when the company gives a financial report on the quarter that just ended in another month to six weeks.

Gannett did do a round of furloughs and pay cuts a week ago, And as I had discussed earlier in a piece with my colleague Kelly McBride, all of its papers are taking down the paywall for all of their pandemic coverage, both fulfilling a public service mission and building equity with a paying audience.

Still, distress is distress. Even with lots of company in the industry and the broader economy, Gannett is experiencing an acute case.

Rick Edmonds is Poynter’s media business analyst. He can be reached at redmonds@poynter.org.

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
Rick Edmonds

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