Wednesday, November 09, 2011

Gannett vs. GateHouse: Damning with faint praise

"I'd work for Gannett before I'd work for GateHouse again." 

-- reader seanwardwell, in a comment posted to a Romenesko blog story about GateHouse Media CEO Mike Reed's memo yesterday, updating employees on efforts to stabilize the company's finances. In May 2007, Gannett sold four newspapers to GateHouse for $410 million: the Norwich Bulletin in Connecticut, the Rockford Register Star in Illinois, the Observer-Dispatch in Utica, N.Y., and The Herald-Dispatch in Huntington, West Va.


  1. Those were the days when you could sell newspapers for big bucks.

    Consider this: Gannett's entire market value is now $2.7 billion -- for 100 newspapers, 23 TV stations, PointRoll, etc.

  2. Let's be honest: the market values Gannett newspapers enterprise value at ZERO. Does that mean they couldn't be sold (assuming you could find buyers) . . . of course they might have a SALE value. But markets look forward, and newspaper operations are in a death spiral.

    If Gannett wants to maximize shareholder value, it would do what Scripps did, and split publishing away from everything else. The fact that they have not leads one to think they might be waiting for a buyout on the cheap, led by the people at the top. THEN they sell off the pieces.

    Two examples.

    1) Sears Holdings. After bankruptcy, which paid obligations for pennies on the dollar, Sears and Kmart merged, just in time for the real estate boom to make anyone holding real estate a genius. In 2005, the first year of the merger, net income was over $800 million. Earlier this year, the loss was $170 million in ONE QUARTER.

    A few years ago, Sears Holdings took its most valuable brands, Kenmore, Craftsman, and DieHard, and put them in a subsidiary. Monetized the subsidiary (KCD) by selling almost $2 billion in bonds. Sears Holdings pays KCD a royalty for using those "brands". As retailers, Sears and Kmart might as well be Montgomery Ward. The value is all in land and trademarks.

    2) Victor Posner. Posner was the king of the hostile takeover, buying companies with low debt (Sharon Steel would be the most famous), mortgaging them to the hilt, and paying himself and family members tons of money to run each company. Stop me if this sounds familiar. After milking each company dry, Posner either filed for bankruptcy or just shut it down. Posner eventually ran afoul of the SEC, but was still worth several hundred million when he died.

    The Gannett leaders are doing the same thing that Posner did. With the benefit of his example and a cadre of lawyers, they're doing it LEGALLY.


Jim says: "Proceed with caution; this is a free-for-all comment zone. I try to correct or clarify incorrect information. But I can't catch everything. Please keep your posts focused on Gannett and media-related subjects. Note that I occasionally review comments in advance, to reject inappropriate ones. And I ignore hostile posters, and recommend you do, too."

Note: Only a member of this blog may post a comment.