Gannett to Buy Des Moines Register : Price of $200 Million Cash Includes Three Sister Papers
Gannett Co., winning a monthlong bidding war against at least four other media companies, said Thursday that it had agreed in principle to acquire the Des Moines Register and three other sister newspapers for $200 million cash, a price substantially higher than previous known bids for the properties.
The deal will give Rochester, N.Y.-based Gannett, the nation’s largest newspaper chain, the biggest newspaper in Iowa. Founded in 1903 by Gardner Cowles, the Register has a daily statewide circulation of 240,000.
It also will become the largest of Gannett’s 87 local daily newspapers, surpassing its 190,700-circulation Cincinnati Enquirer.
Under the deal, Gannett will acquire the Register as well as the Jackson (Tenn.) Sun and two weekly newspapers in Indianola and Independence, Iowa.
The papers are currently owned by Des Moines Register & Tribune Co., which was prompted to begin auctioning off its newspaper and broadcasting holdings following shareholder concern about its poor earnings and squabbles among members of the Cowles family, who own 52.7% of the firm’s stock.
However, Gannett will not acquire Register & Tribune Co.'s two radio and two television stations. Instead, the Iowa firm said New York Times Co. had agreed to purchase its television station in Moline, Iowa, for an undisclosed price.
The Iowa firm also said it is in final negotiations with a potential purchaser of its Honolulu television station, while bids are being sought for its radio stations in Portland, Ore., and Madison, Wis.
Register & Tribune Co. said it has not decided what to do with its 14% stake in Minneapolis-based Cowles Media Co., owner of the Minneapolis Tribune and other media properties.
Cowles family members, who also own a large portion of Cowles Media stock, reportedly preferred that the stake be sold to many buyers rather than to one to prevent any single party from becoming a significant minority shareholder.
Gannett’s bid was selected by the Des Moines firm’s board from among a list submitted by First Boston Corp., a New York-based investment banking firm hired to solicit bids. Register & Tribune Co. Chairman David Kruidenier said four other companies also bid for the newspapers, but he did not reveal their identities.
Analysts said that they most likely included Washington Post Co. and Knight-Ridder Newspapers Inc., among others.
Officials for several other companies--including Chicago-based Tribune Co., New York Times Co., Hearst Corp., Cox Enterprises Inc. and Morris Communications Corp.--reportedly toured the Register’s Des Moines offices in recent weeks and also may have submitted bids.
“Gannett executives have told us the Register will be a prestige newspaper of the Gannett group,” Kruidenier said in a statement. “They bid aggressively and made it clear they were eager to acquire the Register.”
The deal ends a bidding war that began in mid-December, shortly after Register & Tribune Co. rejected three bids for all the company’s holdings. At that point, it hired First Boston to seek other bids.
Those initial bids included a $156-million offer by Ackerly Communications, a Seattle-based communications company; a $112-million bid by Dow Jones & Co. and a group of Iowa investors that included two Register executives, and an unspecified bid by Ingersoll Publications Co. of Sharon, Conn.
In addition, documents filed in a lawsuit by dissident shareholders showed that, in November, Gannett Chairman Allen Neuharth approached Kruidenier about buying either or both of the Cowles-controlled companies.
In a letter to Kruidenier dated Nov. 20, 1984, Neuharth said that, based on public information, Gannett considered Des Moines Register & Tribune Co. to be worth between $134.4 million and $140 million.
While the price agreed to by Gannett was substantially higher than its own previous estimate and the other rejected bids, and did not include the broadcasting stations, newspaper industry analysts generally said the deal was a good one for Gannett.
“This is a positive development for Gannett and totally in line with their longstanding acquisition thrust” to acquire papers that dominate their markets and have potential for a turnaround in profits, R. Joseph Fuchs, an analyst with the New York-based investment firm of Kidder, Peabody, said.
“Many of their acquisitions during the last 15 years have looked expensive at first blush but turned out to be magnificent financial deals with the benefit of three to five years of hindsight,” Fuchs added.
Due largely to the slumping farm economy in Iowa, Register & Tribune Co. lost money in 1982. It regained profitability in 1983 and 1984 but earnings are still considered to be weak, analysts say.
John Morton, a Washington-based analyst with the New York brokerage firm of Lynch, Jones & Ryan, said Gannett has the ability to significantly boost the Register’s earnings by achieving cost savings for newsprint, tightening circulation and initiating aggressive advertising and marketing programs.