The continuing fall in advertising and circulation revenues has forced a new round of rationalisation of the US newspaper market, with Gannett, the biggest publisher, launching a US$815 million takeover offer for the smaller group, Tribune Publishing. Gannett is offering $12.25 per share in cash for Tribune Publishing. The bid includes around US$390 million in debt and other liabilities, making the cash price US$425 million. Gannett said its all-cash bid would provide Tribune stockholders a 63% premium to the closing price of Tribune shares on April 22. Tribune shares jumped more than 60% after the bid was revealed.

Gannett also owns such media properties as the Detroit Free Press, The Des Moines Register and sports websites such as MMAjunkie.com, baseballhq.com and hoopshype.com. It is the largest US newspaper publisher as measured by total daily circulation. The company said it had made the offer privately on April 12, but Tribune Publishing hasn’t responded in a constructive way, so the proposal was released yesterday to the market before trading had started.

It is the second big deal in newspapers for Gannett in a a year. In March the company completed the US$280 million purchase of the Journal Media Group, owner of the Milwaukee Journal Sentinel and Memphis’ Commercial Appeal. That gave Gannett 12% of the daily US newspaper market (compared with the 60% News Corp has in Australia). Gannett already owns 107 regional dailies and weeklies, plus USA Today. For that reason any bid is likely to get a close and possibly negative reaction from US regulators, especially the Department of Justice.

Tribune Publishing has been struggling, reflected in the more than 59% drop in its share price over the last 12 months. Furthermore, a major new shareholder (who owns another Chicago newspaper group, the Sun Times) has upset employees by installing a CEO with no newspaper experience. The deal is likely to result in further consolidation among print media groups, with magazine group Time Inc top of the list.