A $1.4 billion deal to buy USA Today owner Gannett Co. has been so poorly received since it was announced on Monday that executives from both Gannett and its wannabe buyer — New Media Investment — are hitting the road next week in bid to garner support, The Post has learned.
If they don’t succeed, the deal could be derailed, sources told The Post.
On Monday, New Media said it planned to buy Gannett, the nation’s largest newspaper publisher, in a cash-and-stock deal valued at $1.4 billion at the time. The deal would create the nation’s largest newspaper conglomerate by combining Gannett, currently the nation’s largest newspaper publisher, with New Media’s Gatehouse Media, which owns nearly 700 papers across 39 states, including 156 dailies like the Columbus Dispatch in Ohio.
Only, instead of cheering the deal, investors sent shares of New Media plummeting in a selloff that has lasted three days. The now sagging New Media shares will be used as currency to pay Gannett shareholders for selling the company. They could vote the deal down if they feel they aren’t being properly compensated.
“There is an urgent need to keep bankers and investors from selling stock,” a source with direct knowledge of the plans told The Post.
Shares of New Media have fallen 33 percent since the deal was announced, including a 12 percent drop on Wednesday. The selling has sent New Media’s shares from more than $10.50 a share to $7.11 a share — and has lessened the value of the merger from $1.4 billion to under $1.2 billion.
New Media CEO Michael Reed and Gannett chief Paul Bascobert plan to meet with investors in four cities, including Boston and New York, sources said. Three of the four biggest New Media investors are also big investors in Gannett.
One of the issues they will address is New Media’s plan to borrow $1.8 billion from Leon Black’s Apollo Global Management — at an eye-popping interest rate of 11.5 percent, sources said.
Reed, who will run the combined business, plans to tell investors that he aims to save money by paying off the Apollo loan by 2021 — or roughly three years earlier than expected. The company will then get a new loan from a traditional bank charging a much lower five percent interest rate, a source said.
There is no pre-payment penalty for paying the loan down early, the source said.
Reed also will tell investors he plans to sell assets worth about $200 million next year to further reduce debt, the sources said. That likely means exiting some Florida papers where there’s overlap. The combined company would own both the Tallahassee Democrat and Naples Daily News.
Reed could also lure investors by agreeing to raise the dividend late next year, the source said. He‘d slashed it by half as part of the merger announcement.