Business Context and Reporting Period
Company: New Media Investment Group Inc. (trading as USA TODAY Co., Inc.)
Filing Date: August 5, 2019
Event: Entry into a Material Definitive Agreement (Merger) with Gannett Co., Inc.
Context: The Company entered into an Agreement and Plan of Merger to acquire Gannett. Upon closing, Gannett will become a wholly-owned subsidiary of the Company. The combined entity will operate under the "Gannett" brand with headquarters in McLean, Virginia.
Key Financial Metrics and Transaction Terms
Merger Consideration:
- Exchange Ratio: 0.5427 shares of Company Common Stock per share of Gannett Common Stock.
- Cash Component: $6.25 per share of Gannett Common Stock.
- Post-Merger Ownership: Existing Company shareholders will own approximately 50.5%; existing Gannett shareholders will own approximately 49.5%.
Financing:
- Facility: $1,792 million first lien term loan facility committed by Apollo Capital Management, L.P.
- Interest Rate: Fixed at 11.50% annually (subject to a 50 basis point step-up if closing exceeds 6 months).
- Maturity: Five years following the closing of the Merger.
- Use of Proceeds: Repay existing credit facilities and convertible notes, fund the cash portion of the merger consideration, and cover transaction fees.
Management Agreement Changes:
- Term: Fixed termination date of December 31, 2021.
- Incentive Fee: Reduced from 25% to 17.5%.
- Equity Compensation: Manager to receive 4,205,607 shares of Company Common Stock and options to acquire 3,163,264 shares (exercise price $15.50).
Termination Fees:
- Gannett to Company: $45 million (e.g., for entering a Superior Proposal).
- Company to Gannett: $28 million (in reciprocal circumstances).
Note: This filing does not provide historical revenue, profit, cash flow, or margin data for the Company or Gannett.
Material Changes and Governance
Board Composition: The post-merger board will consist of nine directors: five independent members from the Company, three independent members from Gannett, and the Company's CEO. A new "Transformation Committee" will be established to oversee digital transformation.
Leadership: The Company's CEO will remain CEO of the combined company. Gannett's CEO will serve as CEO of all operating subsidiaries.
Branding and Operations: Operating subsidiaries will transition to the "Gannett" brand. Headquarters will move to McLean, Virginia.
Guidance, Risks, and Contingencies
Conditions to Closing:
- Approval by stockholders of both companies.
- Receipt of regulatory clearances (including HSR Act and European Commission).
- Effectiveness of the Form S-4 Registration Statement.
- NYSE listing approval for new shares.
Timeline: The agreement may be terminated if the merger is not consummated by February 5, 2020, extendable to May 5, 2020 under specific regulatory conditions.
Risks and Uncertainties:
- Failure to obtain stockholder or regulatory approvals.
- Inability to secure committed financing or replacement financing on similar terms.
- Integration challenges, including operational disruption and employee retention.
- Failure to achieve anticipated synergies or digital growth targets.
Investor Verification Checklist
- Financing Finalization: Verify the execution of the definitive credit agreement with Apollo, as terms are currently subject to negotiation.
- Regulatory Approval: Monitor the status of antitrust reviews under the HSR Act and European Commission clearance.
- Stockholder Vote: Confirm the outcome of the stockholder votes required by both New Media Investment Group and Gannett.
- Form S-4: Review the upcoming Registration Statement on Form S-4 and the Joint Proxy Statement for detailed financial projections and risk factors.
- Debt Servicing: Assess the impact of the $1.792 billion term loan at 11.50% interest on the combined company's future cash flows and liquidity.