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Gannett and GateHouse combine to become largest newspaper publisher in U.S.

GateHouse Media and Gannett, the 2 largest newspaper chains in the U.S., officially announced a merger on Monday.

Why it matters: The combination of the two publishing powerhouses means that a single company would own 1 in every 6 newspapers in the United States, as Axios reported last month.

Between the lines: Shares of Gannett have soared this year while the holding company that owns GateHouse, New Media Investment Group, has seen its stock tumble into negative territory despite the S&P's strong overall performance.

  • Both companies saw a major boost to their stock performance when news of the merger was first reported on July 18.
  • The market clearly likes the merger, as GateHouse has a reputation for slashing costs and consolidating resources.
  • However, it may be a case of buy the rumor sell the news.
Data: Investing.com; Chart: Axios Visuals

Be smart: Unlike some recent mergers in broadcast and telecom — also legacy industries upended by technology — experts don't believe that the deal would cause any regulatory concerns because the companies don't really overlap in key markets.

  • "People get excited about consolidation among media properties, but I think these two companies still represent a small percentage of news publishing and I don't see in them any true antitrust concerns," says David Chavern, CEO of the News Media Alliance, a newspaper trade association that represents thousands of papers.

The big picture: Consolidation in the newspaper industry is rapidly increasing as consumers and advertisers flock to digital alternatives. Large, publicly-traded, newspaper holding groups are consolidating most of the power.

  • For example, a study from UNC's School of Media and Journalism last year found newspaper sales and closures/mergers via the 7 largest newspaper owners have increased over the past 5 years.

The bottom line: "I think this is part of a continuation of local news publishers trying to get to an economically sustainable business model," says Chavern.