THOMSON SALE RESHAPES GANNETT, CNHI GROUPS

By: Lucia Moses More Announcements Expected Soon



Two U.S. newspaper groups, the biggest by circulation and the one with
the most dailies, will be further enriched with plans to buy 38 of
Thomson Corp.'s dailies.



Thomson, which flooded the newspaper market with 54 small U.S. and
Canadian dailies earlier this year, reached definitive agreements to
sell a chunk of them for $1.58 billion to Gannett Co. Inc. and Community
Newspaper Holdings Inc. (CNHI), with more announcements expected this
week.



Gannett will pick up 21 papers for about $1.13 billion. With 74 dailies
already and 6.7 million in daily circulation, Gannett already enjoys
huge buying power; the Thomson papers will put it just over the 7
million daily circulation mark. But the groups of papers it agreed to
buy in Ohio and Wisconsin, combined with its existing papers in those
states, will improve its advertising clout. Local retailing is
concentrated in the hands of regional chains, which like buying ads in
large groups of papers, media analyst John Morton said. 'This will just
enhance their buying power,' he said.



Gannett will benefit from Thomson's recent press investments in Ohio and
Wisconsin as well as cross-selling efforts that have boosted revenues.
The additions of single papers in Louisiana, Maryland, and Utah may not
bring the same clustering advantages, but could be a springboard to
build new clusters or spin them off, Morton said.



The Thomson papers will likely retain local autonomy when they join the
Gannett fold, but in time will be expected to adapt to Gannett's
editorial philosophy, which has similarities with Thomson's own
readership initiative.



One of the papers, Ohio's Chillicothe Gazette, may feel a sense
of d?j? vu; it belonged to Gannett in the 1990s; CNHI bought it, then
turned around and sold it to Thomson in 1998.



As a smaller company, CNHI may have more to gain from the sale. After
completion of the deal, it will pass the important 1-million daily
circulation mark. President and CEO Mike Reed expects that will give
CNHI, whose papers are mainly in the South and Midwest, more buying
power for supplies as well as advertising. 'I think we're going to have
some doors open up to us,' he said.



The Birmingham, Ala.-based company agreed to pay $455 million for 17
dailies in Indiana, South Georgia, West Virginia, and Maryland, bringing
it to 109 dailies.



CNHI will blend Thomson's clusters with its own, using the best
qualities of both, Reed said. 'Thomson's are doing real well, and if
it's not broke, don't fix it,' he said.



Both buyers will reap the benefits of recent investments in the papers
by Thomson, which has sought to dispel its reputation as tightfisted by
spending heavily on managers and capital improvements. The company also
had pruned its holdings over the years to create regional groups of
dailies, weeklies, and niche publications. With the sale of all its
dailies except Canada's Globe & Mail, Thomson plans to focus on
electronic publishing.



Thomson Newspapers President and CEO Stuart M. Garner said the $1.58-

billion sale price put the company on track to receive between $2.2
billion and $2.5 billion for its U.S. properties. Reed, whose company
has been said to pay a lot for papers, paid 'on the high end' this time,
he said. 'It's not the highest we've ever paid. Considering today's
environment and today's multiples, I think it's fair.'



Agreements to sell the remaining 11 U.S. dailies are expected this week;
Thomson expects to finalize sales of its five Canadian papers by early
next year.