USA Today publisher Gannett agreed to a merger Monday with rival GateHouse in a deal bringing together two of the largest newspaper groups seeking scale in the troubled sector.
GateHouse parent New Media Investment Group will buy Gannett in a cash-and-stock transaction valued at around $1.4 billion that creates a media company with 263 dailies and reaching 145 million customers.
"We believe this transaction will create value for our shareholders, greater opportunities for our employees, and a stronger future for journalism," said Michael Reed, New Media chairman and chief executive.
"Uniting our talented employees and complementary portfolios will enable us to expand our comprehensive, hyperlocal coverage for consumers, deepen our product offering for local businesses, and accelerate our shift from print-centric to dynamic multimedia operations."
Under the deal, New Media will offer stock and cash worth $12.06 per Gannett share and New Media shareholders will hold approximately 50.5 percent of the combined company.
The deal comes with the newspaper sector mired in an extended slump as consumers and advertisers shift to digital platforms.
Jeffry Louis, chairman of the Gannett board, said the tie-up could help the publishers "leverage the combined company?s enhanced scale and financial strength to continue to drive growth in the digital future."
A joint statement said the deal could help realize cost savings of $275 million to $300 million annually.
Dan Kennedy, a journalism professor at Northeastern University who follows the newspaper sector, said it remains unclear whether the merger will be positive for local news coverage.
"What's more important with these combinations is the amount of debt they take on to finance the deal and that has to be paid off," Kennedy said.
"So I don't think it's good news for the communities that they serve."