Gannett downsizes to reduce its debt load

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The USA Today/Gannett Building in McLean, Va. (Photo by Patrick Neil)

Is Gannett’s sale of BridgeTower Media, its business-to-business subsidiary, to private equity firm Transom Capital Group another sign of its struggle to relieve its debt burden? Some company watchers think so.

The decision to divest the BridgeTower segment—which includes the Rochester Business Journal—comes on the heels of another offload, roughly a year after GateHouse Media’s acquisition of Gannett became official, creating the nation’s largest newspaper company. The merged companies, which retained Gannett’s name, let go of papers in Nantucket and Arkansas in October. Terms of the BridgeTower transaction, announced Nov. 3, were not disclosed.

Dan Kennedy, a professor at Northeastern University’s School of Journalism and Media Nation blogger, says it is too early to say that the Gannett chain is in the midst of a sell-off, “but if you’re thinking of making an offer on your local Gannett-owned newspaper, it looks like this might be a good time.”

Shares of Gannett (NYSE: GCI) have lost roughly three-quarters of their value since the merger closed last November. The stock closed Monday at $1.54, up from $1.14 a week earlier.

“Gannett shares have lost about 82.1 percent since the beginning of the year versus the S&P 500’s gain of 2.5 percent,” a Nov. 3 Zacks Equity Research analysis notes.

Sales of non-core assets and real estate assets are expected to help Gannett to reduce its outstanding debt to $1.63 billion, Chairman and CEO Michael Reed said when the company announced its third-quarter results.

Minneapolis-based BridgeTower and the Nantucket Inquirer & Mirror were among the non-core assets whose sale brought Gannett approximately $95 million after the end of the quarter. (The Nantucket paper was acquired by local owners.) Gannett remains the owner of Democrat and Chronicle, the Daily Messenger in Canandaigua and other newspapers in the Rochester region.

GateHouse acquired the business and legal newspapers previously operated by the Dolan Co. (including the Daily Record in Rochester) for $35 million in 2015. The next year, it renamed the subsidiary BridgeTower Media. GateHouse acquired RBJ at the start of the fourth quarter of 2016.

Transom, the new owner of RBJ and the Daily Record, is an operations-focused middle market firm, based in Los Angeles. Its portfolio, with more than $600 million in assets under management, includes properties in what Transom calls the “lower middle market.” The list includes a motley of businesses, from makers of fine-writing instruments (Cross and Sheaffer) and toy manufacturer Uncle Milton to Blue Microphones and Beauty Quest Group, a private-label manufacturer of hair care products. BridgeTower is Transom’s first newspaper acquisition.

Transom’s transactions, the company says, are defined by value-creation potential. Its team works with management to make margin improvements and boost topline growth. Most of its investments are in businesses with more than $5 million in cash flow and earnings before interest, taxes, depreciation and amortization of less than zero to more than $20 million. In some situations, the company does invest in companies with negative to modest cash flow.

BridgeTower served as GateHouse’s business-to-business arm. Through more than 40 print and digital brands, BridgeTower provides content in the legal, business, construction and other sectors. The segment also has a research unit that targets employee satisfaction, and offers lead-generation services and live events. 

While announcing the acquisition, James Oh, partner at Transom, noted BridgeTower’s strong leadership. BridgeTower is run by CEO Adam Reinbach, who joined GateHouse in 2016. Reinbach views Transom’s role as an investment partner in a positive light.

“We’re excited to partner with Transom to expand our business and strengthen our commitment to the markets we serve,” he says.

Reinbach will most likely work with Oh’s team, which is charged with monitoring portfolio companies, including financial and operational oversight. Last year, Oh was named one of the Rising Stars of Private Equity by Mergers & Acquisitions magazine.

As for Gannett, its challenges could be far from over. Last month, the company was readying for another round of voluntary buyouts. In June, Paul Bascobert’s job was folded into Reed’s responsibilities. Bascobert, who spent less than a year at Gannett, was operating CEO.

Smriti Jacob is Rochester Beacon managing editor. She worked at RBJ before it was acquired by GateHouse Media and became part of the BridgeTower Media segment.

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