GANNETT KEEPS FLEXING ITS GIANT MEDIA MUSCLE

By: Joe Strupp and Steve Yahn $2.6B Central Newspapers Inc. deal would give it more than 100 dailies

June shot straight into the history books at Gannett Co. Inc.
Between June 5 and June 28 -- a mere 23 days -- the newspaper-focused giant either laid out or committed itself to laying out $4.53 billion to acquire three major media properties: British publisher Newscom; 21 daily newspapers for $1.13 billion from Thomson Corp.; and, in a deal announced last week, the entire holdings of Central Newspapers Inc.
The Central deal -- which would put The Arizona Republic of Phoenix, The Indianapolis Star, and four other dailies under the Gannett tent -- carries a $2.6-billion price tag, making it the second-largest U.S. newspaper company purchase ever, behind Tribune Co.'s $8-billion takeover of Times Mirror Co. in March.
If offers now on the table are completed, Arlington, Va.-based Gannett would own more than 100 dailies in all parts of the United States -- a 25% increase that would cast the company as an even greater national media force.
""It helps Gannett in what it can offer in national and regional advertising,"" said John Morton, a Silver Springs, Md.-based newspaper analyst. ""Gannett has a heavy cash flow, and they need to do something with it. In the media business, you have to buy properties when they become available.""
Steven N. Barlow, Credit Suisse First Boston's highly regarded newspaper analyst, agreed. ""We like all of the acquisitions,"" he said. ""They're mov- ing debt from about 5% of market capitalization to about 35%. This should enhance return on investment capital and build shareholder value."" Barlow also noted that the Central Newspapers acquisition will significantly strengthen Gannett's presence in the fast-growing Southwestern market. Gannett owns KPNX-TV in Phoenix and the Tucson (Ariz.) Citizen, a Monday-Saturday p.m. newspaper with a daily circulation of 39,328.
Paving the way for the big buys, Gannett's cash reserves were greatly bolstered this January when it sold its 750,000-subscriber cable TV assets to Cox Communications Inc. for $2.7 billion before taxes.
The Central Newspapers sale dissolves yet another of the country's history-rich, family-owned newspaper groups. The Pulliam family, whose newspaper empire dates back more than half a century, earned a reputation for defending reporters and speaking out on journalistic rights. Founder Eugene C. Pulliam, who died in 1975, made news in the 1950s when he led a group of publishers denouncing U.S. Sen. Joseph McCarthy's communist witch hunt. His son, Eugene S. Pulliam, who died in 1999, took over for him and used his papers' power to drive his conservative philosophy, which included vigorously supporting his nephew, former Vice President Dan Quayle, in his bid for the presidency.
Staffers at both the Republic and the Star said they were concerned about going from a family-owned group to a larger company and are taking a wait-and-see approach. ""I'm hoping for the best,"" said John O'Neill, interim state editor at the Star and a 14-year veteran of the paper. ""It was nice that it was family-owned.""
Marc Allan, president of Local 70 of The Newspaper Guild, which represents about 30% of the Star staff, said the sale has sparked concerns among workers, prompting 15 employees to join the Guild shortly after the Gannett deal was made public. He said the Guild's current contract expires in October, but negotiations have yet to begin.

U.K. Acquisitions
In Great Britain, an $800-million purchase completed June 5 added News Communications & Media PLC to Gannett. Newscom is the eighth-largest regional newspaper publisher in the United Kingdom, publishing 99 titles, including four daily newspapers. Last July, Gannett acquired Newsquest PLC, another British publishing chain, which includes 11 dailies.
The only potential conflict in the Central sale is Gannett's ownership of KPNX-TV, since it's in the same market as the Republic. Federal Communications Commission (FCC) rules bar cross-ownership of TV stations and newspapers in the same market, but would not apply to KPNX until the station's license is up for renewal in 2006.
Gannett CEO Douglas H. McCorkindale said he believes the cross-ownership limitations, currently being reviewed by the FCC, will be changed before the license expires.
Louis A. ""Chip"" Weil III, Central chairman, president, and CEO -- and a former 18-year Gannett executive -- said he planned to retire after the Gannett takeover, but that he leaves on good terms.
Industry watchers were quick to note that Gannett is used to very high profit margins, and that the company is a past master at finding ways to cut costs, right down to day-to-day operations. The company, which is still not long on major-market newspapers, has yet to convince some skeptics that it is bent on making the kind of investment necessary to produce a high-quality editorial product.
Gannett stock rose 86 cents to close at $58.99 June 28, the day the deal was announced. The company's stock has dropped from a 52-week high of $83 at the end of 1999 to a low of $56 just days ago. Central stock, which had dropped to a low of $27 only months ago, has seen a dramatic rise since May, climbing to $64 June 28.
Upon completion of the sale, the Republic and the Star will become Gannett's second- and third-largest circulation dailies behind USA Today. The Republic is the nation's 15th-largest newspaper, with a daily circulation of 433,296, while the Star ranks 42nd with 240,000.

GANNETT's JUNE UNIONS

Central Newspapers

Arizona
The Arizona Republic, Phoenix 482,003Mar 31, 2000
Indiana
The Indianapolis Star 243,133Mar 31, 2000*
The Star Press, Muncie, Ind. 34,259Mar 31, 2000
Daily Ledger, Noblesville, Ind.11,956 Oct 31, 1998**
Vincennes (Ind.) Sun-Commercial 12,341 Mar 31, 2000
Louisiana
Alexandria Daily Town Talk 36,202 Mar 31, 2000

Thomson Newspapers

Louisiana
The Advertiser, Lafayette45,112Mar 31, 2000
Maryland
The Daily Times, Salisbury27,661Mar 31, 2000
Ohio
Telegraph-Forum, Bucyrus 7,074Mar 31, 2000
Chillicothe Gazette 16,155Mar 31, 2000
Coshocton Tribune 7,446Mar 31, 2000
The Journal-News, Hamilton24,707Mar 31, 2000
Lancaster Eagle-Gazette 15,961Mar 31, 2000
News Journal, Mansfield34,913Mar 31, 2000
The Marion Star 15,167Mar 31, 2000
Middletown Journal 21,996 Mar 31, 2000
The Advocate, Newark21,858Mar 31, 2000
Times Recorder, Zanesville21,194Mar 31, 2000
Utah
The Spectrum, St. George21,804Mar 31, 2000*
Wisconsin
The Post-Crescent, Appleton56, 219Sep 30, 1998
The Reporter, Fond du Lac18,664Sep 30, 1998
Herald Times Reporter, Manitowoc17,293Sep 30, 1998
Marshfield News-Herald 14,547Mar 31, 2000
Oshkosh Northwestern 23,638 Mar 31, 2000
The Sheboygan Press26,510Sep 30, 1998
Stevens Point Journal 13,941Mar 31, 2000
Daily Tribune, Wisconsin Rapids13,895Mar 31, 2000

Source: Audit Bureau of Circulations
*Five-day average
**Certified Audit of Circulations

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(copyright: Editor & Publisher July 3, 2000)