Sentinel & Enterprise owner buys 9% of rival GateHouse as Gannett merger in limbo

WBJ File Photo GateHouse Media's holdings in Central Mass. include three daily, five weeklies, one monthly magazine and now the Gardner News.

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By Zachary Comeau

The owner of the Fitchburg Sentinel & Enterprise, Lowell Sun and the Boston Herald has acquired a 9.4% ownership stake in GateHouse Media and could vote against a proposed merger between that company and Gannett, the publisher of USA Today.

GateHouse is the parent company for the Worcester Telegram & Gazette, the MetroWest Daily news and hundreds of other U.S. newspapers.

MNG Enterprises, controlled by hedge fund Alden Global Capital, acquired the stake in GateHouse parent firm New Media Investment Group Thursday, just days after the $1.4 billion GateHouse-Gannett merger was announced on Monday.

In a U.S. Securities and Exchange Commission filing disclosing its $45 million acquisition of 5.7 million shares in New Media, MNG Enterprises said the merger may not be in the best interest of New Media’s shareholders. MNG said it may vote against the merger or propose alternatives.

MNG earlier this year attempted to acquire Gannett, but the company’s bid to acquire Gannett was rejected by the latter’s shareholders in February.

Also complicating the proposed merger is the sharp decline in New Media’s share price, which has fallen more than 25% since Aug. 2. The deal includes using a combination of New Media shares and cash as compensation.

Shareholders of both companies are expected to vote on the deal in the coming months with the hopes of closing the transaction by the end of the year.

If the deal is completed, Gannett shareholders will own 49.5% of the combined company and New Media shareholders will own 50.5%. The companies said a loan of nearly $1.8 billion in private equity was secured to pay off debt for both companies and fund the cash component of the merger.

The companies hope the deal accelerates the transition to digital media and away from traditional print media for both companies, and brings an opportunity to realize cost synergies of up to $300 million annually, according to the acquisition announcement.