After the markets closed on Monday, Gannett Co., Inc. (NYSE: GCI) and ReachLocal, Inc. (NASDAQ: RLOC) announced the execution of a definitive merger agreement under which Gannett would acquire all outstanding shares of ReachLocal. Gannett will pay $4.60 per share which represents a 188% premium to the unaffected closing price on Friday, June 24, 2016, and a total enterprise value of roughly $156 million.
The transaction has been unanimously approved by both boards of directors and is expected to close in the third quarter of 2016.
Gannett expects this transaction to be neutral to earnings per share in its first full year and modestly accretive in its second full year. However, ReachLocal will initially expand Gannett’s digital revenue by roughly 50% with its more than 16,000 customers in its global markets.
At the conclusion of Gannett’s current digital services arrangement in its existing markets in mid-2017, the combined organization will benefit from leveraging ReachLocal’s best-in-class digital marketing services products in Gannett’s existing 107 local markets in the U.S.
Robert Dickey, Gannett President and CEO, commented:
The acquisition of ReachLocal accelerates Gannett’s digital growth strategy, adding more than $320 million of annual digital revenue, the best digital marketing solutions technology in the market, and an outstanding and well-respected management team to Gannett’s digital business. ReachLocal’s focus on local small and medium sized businesses aligns well with Gannett’s local-to-national strategy and extends our reach into new local markets. This transaction represents an important step as we continue to transform our business to meet the changing needs of consumers and advertisers in today’s digital world. We are excited to welcome the talented ReachLocal team to Gannett and look forward to working with them to drive digital growth and create value for our stockholders.
Shares of Gannett were last trading down 1% at $13.49, with a consensus analyst price target of $18.50 and a 52-week trading range of $10.75 to $17.91.
Shares of ReachLocal were recently trading up 169% at $4.55. The stock has a consensus analyst price target of $2.60 and a 52-week trading range of $0.55 to $4.57.