GateHouse Media newspapers generate strong cash flow for its parent company, New Media Investment Group.
That parent company — which grew from the ashes of GateHouse Media bankruptcy — is using some of that cash flow to help finance newspaper purchases.
After escaping more than $1 billion in debut, those folks have spent $150 million in 10 months to expand their media empire.
How can they do this? Because the surviving employees of GateHouse/New Media operations have kept doing more with less during the most challenging times this industry has ever seen.
The company quit giving regular raises years ago. Worse, it slashed news operations to the bone\ while simultaneously launching bold digital initiatives.
That allowed the company to keep pumping money out of its newspapers. And now that money is going towards stock dividends and asset purchases instead of debt payments.
The latest GateHouse/New Media purchase, the Providence Journal, is a great fit for the company. The company paid a premium to get it, but it gained a strong product, a good market and the ability to further consolidate operations in Southern New England.
Here are some key points about the purchase:
- The $46 million price tag is considered high, more than twice what the Worcester Telegram & Gazette fetched. (GateHouse/New Media was reported to be on that bidding as well, but the paper sold to Halifax Media.)
- But the T&G sale did not include a printing operation. The Journal prints its own papers and has other printing contracts. GateHouse/New Media regard printing operations as a key piece of its current revenue pie.
- On the other hand, A.H. Belo is keeping the Journal’s headquarters building to sell off. GateHouse/New Media will lease the building for a year while exploring relocation options.
GateHouse/New Media will not assume liability for defined-benefit pension plan. Belo is maintaining that.
- GateHouse/New Media sees the Providence market as a huge opportunity for its Propel Marketing initiative. The company believes Propel can become a major source of revenue growth once its gains traction.
- Since GateHouse/New Media has several operations is Southern New England, it can “gain efficiencies” with this purchase.
- The Providence Newspaper Guild represents employees of The Journal, so GateHouse/New Media will encounter resistance as it seeks further job cuts.
Jon Chesto of the Boston Business Journal offered this assessment:
I’ll be honest here: I was once skeptical of New Media’s aggressive acquisition ambitions. Fortress Investment Group co-founder Wes Edens first signaled that GateHouse would be an acquirer again last September, when he announced that a new version of the company would look to make as much as $1 billion in acquisitions over a three-year period. Fortress, a major investor in GateHouse and then also a major bondholder, pushed GateHouse through bankruptcy last year to erase its mountain of debt, and created New Media as a new publicly traded holding company to add to its empire. In March, New Media disclosed that it was looking at a pipeline of $150 million to $300 million worth of acquisitions. Some of this is being financed through debt, and some from the company’s operating cash flow.
So far, there have been a number of deals, big and small. Most notably, a Fortress affiliate picked up Dow Jones’ community newspapers — a group that included the Cape Cod Times and The Standard-Times of New Bedford, now part of New Media — for $82 million. In all, (CEO Michael) Reed says New Media has reached agreements to buy about $150 million worth of media properties in the past 10 months. So Reed, (COO Kirk) Davis and their team have proven their ability to make these deals, particularly so many in a short period of time. But whether they can successfully integrate them into the New Media empire while ensuring the profits continue to flow and the papers stay vital to their local communities remains an open question.
That last point is where the Guild is so critical. It is our task to protect the quality of journalism at the many GateHouse/New Media newsrooms we represent.
Some of the steps that GateHouse/New Media take — like the proposed outsourcing of all photography at the Rockford Register Star — could cause long-term damage.
We must do all we can to ensure that these communities will benefit from strong news reporting five, 10 and 20 years down the road.