By: Tony Case
For a purchase price of $1.7 billion media giant gets 11 dailies,
49 nondailies, vast cable, broadcast and entertainment holdings sp.
THE BIGGEST U.S. newspaper company is getting even bigger ? and expanding into cable television and TV syndication.
Arlington, Va.-based Gannett Co. Inc., which publishes 82 daily papers, including USA Today, announced this week it will buy Multimedia Inc. of Greenville, S.C., for some $1.7 billion.
Gannett picks up Multimedia’s 11 dailies and 49 nondailies, including flagship properties in three Southern states where Gannett has no newspapers. They are the Greenville News and Piedmont, Asheville (N.C.) Citizen-Times and Montgomery (Ala.) Advertiser.
Gannett’s total daily newspaper circulation will exceed 6.4 million with the acquisition.
The company said it will pay $45.25 for each of Multimedia’s 37,865,078 outstanding shares and assume or retire the company’s existing debt. The purchase price will be adjusted if Multimedia’s debt as of Dec. 31 exceeds a specified figure.
The boards of both companies unanimously agreed to the deal, which is subject to stockholder and regulatory approval.
Media General Inc. of Richmond, in concert with a group of smaller communications concerns, reportedly had offered $1.5 billion for Multimedia.
“We are extremely pleased to be the successful bidder for Multimedia,” Gannett chairman, president and CEO John Curley said in a prepared statement. “The quality of Multimedia’s management and employees and its well-located assets will enhance Gannett’s position as a leading news and information provider.”
With the transaction, Gannett gets not only additional newspapers but also Multimedia’s vast cable, broadcast and entertainment holdings.
Unlike other newspaper companies, Gannett has never broken into the flourishing cable industry. But all that changes with the purchase of Multimedia, whose cable systems serve over 450,000 subscribers in five states and earned $53 million in profit last year.
Newspaper industry watchers wondered, however, whether Gannett would retain the cable interests, pointing to aggressive competition from monster telephone companies.
“Its main target was the newspapers and broadcast stations,” said media analyst John Morton of the firm Lynch, Jones & Ryan Inc. “It’s widely perceived that to compete against the telephone companies [in cable], you must be very big, meaning three million to four million subscribers. I don’t think anybody expects them to go out and get 21/2 million subscribers.”
Gannett, which currently owns 10 TV stations and 11 radio stations, builds its broadcast empire with the addition of Multimedia’s five network-affiliated TV stations and two radio stations, all situated in the Midwest and the South.
Some of television’s most visible personalities now will work for Gannett, as Multimedia’s entertainment division produces shows hosted by Phil Donahue, Rush Limbaugh, Sally Jessy Raphael and Jerry Springer.
But Wall Street also was unsure about the future of this part of the acquisition, as some these programs have seen their share of the market diminish as talk shows have proliferated.
Besides, Gannett hasn’t had the best of luck in the TV production game.
In the 1980s, it entered into a costly and unsuccessful venture with former NBC chairman Grant Tinker that produced a magazine program based on the nationally distributed USA Today.
Last year, Multimedia reported operating revenue of $630.5 million and operating income of $189.4 million. Gannett’s operating revenue totaled $3.8 billion and its operating income was $812.8 million.
On July 24, the day the deal was announced, Multimedia’s shares closed at $42.45, up 50?. Gannett closed at $53.25, down 50?.
The Standard & Poor’s rating service warned that financing the transaction could boost Gannett’s debt levels “significantly” from the $830 million reported as of March 31, and assuming or retiring Multimedia’s debt ? about $560 million at the end of the first quarter ? would further increase Gannett’s burden.
Besides USA Today, some of Gannett’s better-known newspaper titles include the Detroit News, Louisville Courier-Journal and Des Moines Register. It also publishes the weekly magazine USA Weekend and operates North America’s largest outdoor advertising company.
The daily papers owned by Multimedia, other than those listed above, are the Baxter Bulletin in Mountain Home, Ark.; Moultrie (Ga.) Observer; Daily Sentinel of Pomeroy, Ohio; Gallipolis (Ohio) Daily Tribune and Sunday Times-Sentinel; Leaf-Chronicle, Clarksville, Tenn.; Daily News Leader, Staunton, Va.; and Point Pleasant (W.Va.) Register.
Multimedia also puts out several total-market-coverage (TMC) products, shoppers and specialty periodicals and operates a security-alarm company with 76,000 customers in eight states.