Gannett (GCI) To Acquire ReachLocal To Boost Digital Growth

Newspaper publishing companies are focused on diversifying their revenue base. They are endeavoring to expand their presence in digital products with the aim to lower dependence on the soft print media business and traditional advertising. In this regard, Gannett Co., Inc. (NYSE:GCI) , which operates as a multi-platform news and information company, entered into a deal to acquire ReachLocal, Inc. in order to provide a boost to its digital offerings.

The transaction, worth $4.60 per share, reflects a 188% premium to ReachLocal's closing price last Friday and a total enterprise value of about $156 million. The deal is expected to conclude in the third quarter of 2016. This buyout is anticipated to be neutral to earnings per share in the first full year but will be modestly accretive to earnings in its second full year.

Gannett, which sports a Zacks Rank #1 (Strong Buy), stated that the acquisition of ReachLocal, the digital marketing solutions company, will help enhance its digital revenue by approximately 50% initially. ReachLocal has over 16,000 customers in markets throughout North America, Latin America, Europe and the Asia/Pacific, and provides services in the home, healthcare, automotive and professional space.

Gannett, in the recent past, completed the acquisition of Journal Media Group, Inc., the owner of the Milwaukee Journal Sentinel and other newspapers, for approximately $280 million. Journal Media Group was formed after Journal Communications and E.W. Scripps merged their broadcasting operations and split the newspaper business. The merged broadcasting and digital media company, headquartered in Cincinnati, retained the name, The E.W. Scripps Company (NYSE:SSP) .

Gannett, the publisher of USA TODAY, is also striving to acquire tronc, Inc. (NASDAQ:TRNC) , earlier known as Tribune Publishing Company, and has maintained its offer of $15 per share. Gannett, which retained the name of its parent company, was formed after the Broadcasting and Digital units were spun off to form a separate entity known as TEGNA Inc. (NYSE:TGNA) .