Los Angeles Times - 06.08.2019

LATIMES.COM/BUSINESS TUESDAY, AUGUST 6, 2019C3

NEW YORK — Two of the
country’s largest newspaper
companies have agreed to
combine, creating a new in-
dustry giant that hopes to
manage the crisis of print’s
decline through sheer size.
GateHouse Media, a fast-
growing chain backed by an
investment firm, is buying
USA Today owner Gannett
Co. for $12.06 a share in cash
and stock, or about $1.4 bil-
lion, promising to speed up a
digital transformation as
readers shift online. The
companies say they are com-
mitted to “journalistic excel-
lence” — while also planning
to cut $300 million in yearly
costs.
The combined company
would have more than 260
daily papers in the United
States, along with more
than 300 weeklies. It would
be the largest U.S. news-
paper company by far, with a
print circulation of 8.7 mil-
lion — 7 million more than
the new No. 2, McClatchy, ac-
cording to media expert Ken
Doctor.
Local papers, faced with
the complex and expensive
process of building digital
businesses to replace de-
clines in print ads and circu-
lation, have been consolidat-
ing madly in recent years. Al-
though papers with national
readership such as the New
York Times and the Wash-

ington Post have had suc-

cess adding digital subscrib-

ers, local papers with local

readerships are having a dif-

ficult time. Hundreds of

such papers have closed,

and newsrooms have

slashed jobs.

According to a study by

the University of North Car-

olina, the U.S. has lost al-

most 1,800 local newspapers

since 2004. Newsroom em-

ployment fell by a quarter

from 2008 to 2018, according

to Pew Research, and layoffs

have continued this year.

Both GateHouse and

Gannett are known as buy-

ers of other papers. Bulking

up lets companies cut costs

— including layoffs in news-

rooms — and centralize op-

erations.

Those cuts could give the

owners “a cushion of time” to

figure out how to improve

their digital businesses,

longtime industry analyst

Rick Edmonds of the Poyn-

ter Institute wrote Sunday.

But it’s no panacea. “I

don’t think, just by these

companies merging, they’re

going to somehow magically

find a new business model,

make everything all right

and produce robust journal-

ism at a local level,” Butler

University journalism pro-

fessor Nancy Whitmore said.

Still, she said, a bigger, com-

bined newspaper company

could sell more national ads

and boost ad revenue.

GateHouse’s owner, New

Media, is taking on new debt

to get the deal done — a $1.8-

billion loan from private eq-

uity firm Apollo Global Man-

agement. That will have to

be paid back.

“We’ve been hearing for

years and years about the

glories of cost efficiencies,”

said Northeastern Uni-

versity professor Dan Ken-

nedy, a proponent of local

ownership for media outlets.

But it’s unclear, based on

past media mergers,

whether those savings will

benefit the papers, its em-

ployees or their readers, he

said. He wonders whether

combined companies make

more or fewer cuts than they

would have if they had re-

mained separate.

Several experts said they

do not expect the Justice De-

partment to have an issue

with the deal, as the two

companies have papers in

different markets. The com-

panies expect it to close this

year.

The combined company

would take the Gannett

name and keep its head-

quarters in Gannett’s cur-

rent home of McLean, Va.

Consolidation is nothing

new to either company. Gan-

nett’s last big U.S. print pur-

chase was in 2016, when it

bought papers in the Jour-

nal Media Group chain for

$280 million, including the

Milwaukee Journal Sentinel

and the Commercial Appeal

in Memphis. Gannett also

owns dailies in major cities

such as the Detroit Free

Press and Arizona Republic.

It failed in an unsolicited

bid for newspaper chain

Tribune. Gannett then

fended off an unwanted bid

by MNG Enterprises, better

known as Digital First Me-

dia, a hedge-fund backed

media group with a slash-

and-burn reputation for cut-

ting jobs and letting papers

wither.

Gannett shares rose 2.7%

to $11.04. New Media Invest-

ment Group, which owns

GateHouse, saw its stock fall

7.6%, to $9.89 a share.

GateHouse, Gannett to form a giant

Two of the country’s

largest newspaper

companies will merge,

promise to accelerate

digital transformation.

associated press

GANNETT CO., headquartered in McLean, Va., is being purchased by GateHouse Media, a fast-growing chain

backed by an investment firm. The companies may cut costs as they figure out a digital business plan.

Jacquelyn MartinAssociated Press

HSBC Holdings on Mon-

day announced the surprise

departure of Chief Executive

John Flint after just 18

months, saying that new

leadership was needed at

the bank as economic uncer-

tainty grows and that it was

cutting 4,000 jobs to reduce

costs.

HSBC said Flint stepped

down by mutual agreement.

Noel Quinn, the bank’s CEO

of global commercial bank-

ing, will serve as interim

CEO while the bank looks for

a permanent replacement.

Flint, 51, spent almost 30

years at the bank before he

became CEO with the prom-

ise to “continue to innovate

and accelerate the pace of

change” needed to meet the

demands of shareholders

and customers. HSBC

shares have sunk almost 14%

since Flint took over, com-

pared with a less than 1%

drop in the FTSE 100 index.

The bank on Monday re-

ported second-quarter prof-

its of $4.4 billion, up 7% from

the same period last year,

but it warned that “geopolit-

ical issues could impact a

significant number of our

major markets.” Economic

growth is expected to slow in

the United States and China

amid the U.S.-China trade

war. Asia accounts for 80% of

HSBC’s profits. And Britain

is preparing to leave the Eu-

ropean Union on Oct. 31,

raising uncertainty for the

London-based business.

HSBC confirmed that on

top of the leadership reshuf-

fle, it plans to cut 4,000 jobs

globally, or about 2% of its to-

tal workforce.

“With macroeconomic

and geopolitical head winds

mounting, the HSBC board

could be looking for more

radical reform,” said Nicho-

las Hyett, an analyst at Har-

greaves Lansdown. “What

that will look like remains to

be seen.”

Chairman Mark Tucker

said that although the bank

is in a strong position to de-

liver on strategy, a change of

leadership is necessary.

“In the increasingly com-

plex and challenging global

environment in which the

bank operates, the board be-

lieves a change is needed to

meet the challenges that we

face and to capture the very

significant opportunities

before us,” he said.

Surprise

exit for

CEO

of HSBC

associated press

Luxury movie theater
chain iPic Entertainment,
which helped lead the rise of
dine-in moviegoing, has filed
for Chapter 11 bankruptcy
protection and will pursue a
sale, the company said Mon-
day.
However, the Boca Ra-
ton, Fla.-based firm, which
has 16 locations, including
theaters in Westwood and
Pasadena, will remain open
for business, said founder
and Chief Executive Hamid
Hashemi.
“To ensure an exciting fu-
ture for iPic for the benefit of
our guests, members, em-
ployees and other partners,
we have hired top consult-
ants and advisors to find a
partner who shares our vi-
sion,” Hashemi said in a
statement. “Our brand is
thriving and leads the indus-
try in popularity, but our bal-
ance sheet needs to course
correct.”
The company’s stock
plunged 54% to 76 cents a
share. The stock has lost
nearly all its value since the
company held its initial pub-
lic offering in February last
year at $18.50 a share.
Founded in 2010, iPic

carved out an early niche in

the film exhibition industry

with its high-end in-theater

dining concept in which pa-

trons could order food and

beverages, including wine

and cocktails, from their

seats with the push of a but-

ton. Many iPic locations also

have full-service restaurants

attached.

IPic acquired Gold Class

Cinemas, which pioneered

the idea of letting customers

order food and booze from

their seats when it opened

its theater in Pasadena in

2009.

But the concept has since

become mainstream as large

exhibitors have upgraded

their theaters to combat

long-term declines in at-

tendance.

Rivals such as Mexican

theater chain Cinepolis and

Leawood, Kan.-based AMC

Theatres, the world’s big-

gest circuit, have introduced

their own luxury theaters

with dine-in options. Perks

such as recliner seating and

alcoholic beverages have be-

come increasingly common.

The tough competition,

which often offered ameni-

ties at a lower price than

iPic, proved to be a major ob-

stacle, according to court fil-

ings. An iPic adult ticket

costs about $32, a high price

compared to most other the-

aters, even in major cities

such as Los Angeles.

“Even though the compa-

ny’s competitors’ overall ex-

perience did not compare to

that of [iPic], the availability

of reclining seats used by

competitors at a lower con-

sumer price point proved to

be a challenge,” said Aurora

Management Partners co-

founder David M. Baker, in

his court declaration filed

Monday.

Rising construction

costs, a disappointing IPO

and the cyclical nature of the

box office also posed chal-

lenges, Baker wrote. The

company had planned to

build 20 to 25 locations.

IPic has struggled under

a heavy debt load. The com-

pany, in a regulatory filing,

said it owes $205 million to

secured creditors under a

pre-petition loan agree-

ment, along with $13 million

to $15 million to unsecured

creditors, including vendors

and suppliers. IPic posted a

loss of $56.8 million last year.

As of Dec. 31, 2018, the com-

pany had assets valued at

$158.7 million and liabilities

totaling $277.9 million.

Current management

will remain in place during

the bankruptcy process,

which the company expects

will take 90 to 120 days, the

firm said.

The company has se-

cured $16 million in debt fi-

nancing from the Teachers’

Retirement System of Ala-

bama and the Employees’

Retirement System of Ala-

bama to fund its operations.

IPic has 240 full-time em-

ployees and 1,770 part-time

workers.

Luxury cinema chain iPic in bankruptcy

Trailblazing movie

theaters were among

the first in industry to

popularize chic dining

and booze concepts.

By Ryan Faughnder

MINECRAFTfans gather at the iPic Westwood theater for a computer gaming

event. The cinema chain was known for its plush seating and gourmet food.

Luis SincoLos Angeles Times

City National Bank said
Tuesday that it acquired
FilmTrack, a Studio City-
based software company
that helps entertainment
businesses manage their in-
tellectual property.
Financial terms of the
deal were not disclosed.
City National Bank said
the deal will provide its cus-
tomers with more services,
while FilmTrack said the

bank’s investment will help

it grow.

FilmTrack’s software

helps entertainment com-

panies keep track of their in-

tellectual property, includ-

ing whether firms have the

rights domestically or

abroad to sell or license a TV

show or film.

“FilmTrack’s leading

technology and City Nation-

al’s history of serving the en-

tertainment industry create

a perfect combination,”

FilmTrack co-founder and

CEO Jason Kassin said in a

statement.

City National Bank CEO

Kelly Coffey said the deal

shows the L.A.-based bank’s

continued commitment to

providing services for the

entertainment industry.

“Organizing contracts,

tracking rights and making

timely payments have be-

come significantly more

complicated with all of the

changes taking place in the

entertainment industry,

and our company is able to

offer unique and compelling

solutions,” Coffey said in a

statement.

Jason Kassin and his

brother Stephen founded

the company in 1996 and

have raised more than $40

million in equity. In the

1990s, Jason Kassin, an ac-

tor, screenwriter and a self-

taught computer

programmer, was hired by

Overseas FilmGroup Inc. to

write software that tracked

the movie company’s film

portfolio. Jason Kassin later

decided to launch a similar

version of that software,

which became FilmTrack.

The company, which has

60 employees, will become a

subsidiary of City National.

FilmTrack’s executives will

continue on after the deal,

holding multiyear contracts,

City National said.

FilmTrack’s nearly 200

entertainment clients in-

clude A&E, Voltage Pictures

and AMC Networks.

City National Bank buys

software firm FilmTrack

The acquisition adds

intellectual property

management services

to the L.A.-based

bank’s offerings.

By Wendy Lee

FILMTRACKwas founded by Stephen and Jason

Kassin to help track intellectual property rights.

Luis SincoLos Angeles Times