The New York Times - 06.08.2019

B6 N THE NEW YORK TIMES BUSINESSTUESDAY, AUGUST 6, 2019

MEDIA | POLICY| RETAIL

An agreement between two large
newspaper chains on Monday laid
the groundwork for a new publish-
ing behemoth while raising ques-
tions about future investments in
local journalism.
New Media Investment Group,
a holding company that controls
GateHouse Media, announced
that it had agreed to buy Gannett,
the owner of USA Today and more
than 100 other publications na-
tionwide, in a transaction valued
at roughly $1.4 billion.
Once combined, GateHouse
and Gannett will publish more
than 260 daily newspapers in the
United States, along with more
than 300 weekly publications in 47
states, as well as Guam. The new
company will go by the name Gan-
nett.
The companies expect that sav-
ings from the merger, which is ex-
pected to be completed by the end
of the year, would total as much as
$300 million annually. And though
they said the merger would “en-
hance quality journalism,” both
companies have cut costs in re-
cent years by laying off journal-
ists.
Gannett owns The Detroit Free
Press, The Arizona Republic, The
Milwaukee Journal Sentinel and
other prominent newspapers in
small, midsize and large cities.
GateHouse Media, which owns
154 daily newspapers and oper-
ates in 39 states, has been on a
buying spree in recent years,
striking deals to acquire The
Austin American-Statesman, The
Palm Beach Post and The Akron
Beacon Journal.
The planned merger comes
more out of perceived weakness

than strength: With a few excep-

tions, newspapers are struggling

as readers abandon ink and paper

in favor of websites and news

apps. Print advertising revenue

has plummeted, and the money

publishers have made from digital

advertising has fallen short of

what newspapers used to bring in

from print ads.

One result has been the in-

crease in so-called ghost papers —

thin versions of once robust publi-

cations put out by bare-bones

staffs. Although print newspapers

are in steep decline, Wall Street-

backed companies like Gate-

House Media and MediaNews

Group, see them as still valuable,

if distressed, assets.

In 2018, the print business still

brought in $25 billion, according to

a study by the University of North

Carolina. New Media Investment

Group, a publicly traded company

with headquarters near Roches-

ter, N.Y., has put money into jour-

nalism through GateHouse Me-

dia.

In recent years, GateHouse Me-

dia has shrunk newsrooms while

pursuing shareholder value, in

part by consolidating operations

in regional hubs and merging

newspapers. Gannett, which has

been in the news business for

nearly a century, laid off journal-

ists all across the country earlier

this year.

In a conference call Monday,

Michael Reed, the New Media

chairman and chief executive who

will run the combined company,

declined to specify how cost sav-

ings would result from the merger,

citing “efficiencies” and “cost re-

allocation.” New Media is man-

aged by the New York investment

management firm Fortress In-

vestment Group through an affili-

ate. Fortress is owned by Soft-

Bank, a Japanese conglomerate.

John Jeffry Louis, the chairman

of Gannett, said in a statement,

“We see numerous opportunities

to leverage the combined compa-

ny’s enhanced scale and financial

strength to continue to drive

growth in the digital future.”

Penny Abernathy, a journalism

professor at the University of

North Carolina who has studied

the decline of newspapers, said

layoffs were all but guaranteed.

Noting that both companies house

business functions and even edi-

tors in regional centers away from

the newsrooms, Ms. Abernathy

added that the combinations of

shrunken newsrooms and distant

management could have a bad ef-

fect on local coverage.

“Often you have a publisher re-

sponsible for five or six newspa-

pers,” she said. “There’s no way,

when you’re removed from that

community, that you understand

what’s happening on the ground

in the same way that you would

understand it if you lived in that

community.”

Even before the merger, the two

companies were the two largest

chains in terms of both number of

newspapers owned and circula-

tion, according to researchers at

the University of North Carolina.

Combined, their papers would

have a circulation of more than

eight million.

Gannett has been a sought-af-

ter property. Earlier this year, it

fended off a takeover attempt by

MediaNews Group, a company

controlled by the hedge fund Al-

den Global Capital.

The agreement on Monday

calls for Gannett shareholders to

receive $12.06 per share in a com-

bination of cash and New Media

shares, for a premium of about 18

percent.

Though New Media is buying

its competitor, the company re-

sulting from the deal will go by

Gannett, a name that goes back to

the early part of the 20th century,

when Frank E. Gannett, who

owned half of the Elmira Gazette

in Elmira, N.Y., became a media

baron with the acquisition of other

newspapers.

“We are honored to become a

part of Gannett’s storied history

and a steward of their strong me-

dia properties into the future,” Mr.

Reed, the New Media executive,

said in the statement. “We are

committed to delivering signifi-

cant synergies in a thoughtful

manner.”

Acquisition of Gannett

Creates Print Goliath

In a $1.4 Billion Deal

By MARC TRACY

The deal between the parent of GateHouse Media and Gannett, which publishes USA Today, creates a company with more than 260 daily newspapers.

STEVEN SENNE/ASSOCIATED PRESS

Over the last 18 months, progress
toward a settlement in the mas-
sive federal opioid litigation has
stalled, even as the costs of the cri-
sis continue to mount.
Now, an inventive plan to jump-
start negotiations, recently put
forth by lawyers for the nearly
2,000 cities and counties that have
brought cases, is facing attacks
from an unlikely source. Push-
back that could torpedo it is com-
ing less from the corporate de-
fendants than from the localities’
uneasy allies: the states.
It is a struggle over power, poli-
tics and money. And in an arena
filled with outsize egos, the fight is
also very much about who will get
to claim credit for resolving a pub-
lic health crisis that has killed
more than 200,000 people since
1999 and sunk many more into de-
bilitating addiction.
A hearing on the proposal is
scheduled for Tuesday in Cleve-
land before the federal judge who
is overseeing the cases, Dan A.
Polster.
The plan was devised to ad-
dress a major sticking point: The
defendants, including manufac-
turers that developed and made
the drugs, Fortune 20 companies
that distributed them and national
pharmacy chains that sold them,
want an end to the constant
stream of lawsuits.
So lawyers for the plaintiffs sug-
gested allowing all 34,000 towns,
cities and counties in the country
to vote on settlement offers. After
an offer is approved, they will be
bound by the outcome and can
bring no further suits. All voting
communities affected by the crisis
would get a portion of the payout.
But a letter signed by a biparti-
san coalition of 39 state attorneys
general raises arguments that
could topple the ambitious pro-
posal and further slow talks.
Rather than myriad cities and
counties, they contend, it is the
states, through law enforcement
and regulatory authority, that can
efficiently wrest a high-impact na-
tional agreement. They maintain
that this plan goes behind the
backs of the states pursuing cases
brought by their own attorneys
general, who are elected or ap-
pointed. By contrast, local govern-
ments are using private lawyers,
who work on contingency fees.
The states also fear that the
plan would corral money for the
cities and counties that they
should control. And because this
“negotiation class” is untested,
they argue, it is likely to be ap-
pealed, delaying remedies for ev-
eryone.
“In my view, it’s the plaintiffs’
lawyers using local governments
to hijack the sovereignty of the
states and create ‘city states,’ ”
said Dave Yost, the Ohio attorney
general, who filed a letter critical
of the plan. “But this is not the
United City-States of America.”

The plaintiffs also intend their

proposal to be a course correction

to the Big Tobacco settlement, as

well as a possible template for fu-

ture resolutions in such public

welfare areas as firearms, climate

change and environmental pollu-

tion.

The 1998 Master Tobacco Set-

tlement, which resulted in pay-

outs of some $250 billion, was

struck between five cigarette

manufacturers and 46 states seek-

ing reimbursement for their Med-

icaid programs for treating tobac-

co-related illnesses. But much of

the money went to discretionary

funds of state legislatures. Espe-

cially in the wake of the 2008 fi-

nancial crisis, hefty amounts were

redirected to balancing budgets

and fixing potholes, rather than to

local prevention and treatment

programs.

Still bitter about those out-

comes, communities whose cof-

fers had been depleted by the opi-

oid crisis decided to sign with pri-

vate lawyers, circumventing the

states.

Since 2013, when Chicago filed

its opioid lawsuit, platoons of

these private lawyers have taken

more than 500 depositions, filed

thousands of motions, read

through more than 50 million

pages of documents and analyzed

raw code from the Drug Enforce-

ment Administration about pill

distribution. At Judge Polster’s di-

rection, they have shared their

trove with the states.

“None of the attorneys general

complained while we were doing

all that,” said Paul Geller, an attor-

ney whose opioid clients include

Los Angeles. “It kind of makes

you wonder why seeking to orga-

nize for negotiation purposes all of

a sudden crosses the line for

them.”

Strictly speaking, the states,

whose cases are in state court,

have no say in the federal litiga-

tion. While all are suing some

manufacturers, fewer are going

after the deep-pocketed distribu-

tors, and fewer still have named

pharmacy chains. With the excep-

tion of some states, including Ok-

lahoma, Massachusetts and New

York, opioid litigation by many at-

torneys general lags behind the

federal cases.

But mindful that the conclusion

of federal and state cases likely

depends on each other, Judge Pol-

ster has regularly solicited input

from the attorneys general.

So how do they really feel? The

states bluntly say that the negoti-

ation plan usurps a role that is

properly theirs.

Under the legal doctrine called

“parens patriae” — parent of the

nation — states, in a wide swath of

cases, often assume the role of

vindicating the interests of vul-

nerable citizens.

“We have a vision of the state at-

torneys general as being prefera-

ble because they’re insulated from

money,” said Adam Zimmerman,

who teaches complex litigation at

Loyola Law School, Los Angeles.

“But they’re not insulated from

politics,” he added, noting that the

position is often a steppingstone

to higher political office.

Mr. Yost, the Ohio attorney gen-

eral, and others argue that these

cases should be resolved from the

top down, not the bottom up. But

each state’s relationship with local

government, enshrined in its con-

stitution and laws, varies. Fund-

ing sources for the diverse costs of

the opioid crisis, whether local or

state, also differ from state to

state.

And so the states say they

should disburse the money. The

fly in that ointment is that many

states preclude attorneys general

from distributing settlement

money, because their legislatures

control such funds.

Rather than approving the

plaintiffs’ plan, Mr. Yost said,

Judge Polster could ascertain

each state’s relationship with its

municipalities. He could then en-

courage those with similar laws

and interests to negotiate in

groups. That process, Mr. Yost

predicted, would be more stream-

lined than this proposal.

“If I were a defendant, I’d be

very wary of dealing with the cit-

ies and counties, knowing that the

state attorneys general were still

gunning for me,” said Elizabeth C.

Burch, a law professor at the Uni-

versity of Georgia who closely fol-

lows the litigation. “I’d be more in-

clined to do a global deal with

them that pre-empts the city and

county cases.”

Mr. Yost said that if the states

oversaw negotiations, private

lawyers would still get paid — any

settlement would include a sepa-

rate money bucket for them. “But

I think that’s a one-gallon bucket

for washing the car and they think

it should be an oil tanker.”

There’s a love-hate relationship

between the states and private

lawyers, he said. While a govern-

ment’s use of private lawyers

dates to early English common

law, the biggest boost to that prac-

tice came during the tobacco liti-

gation itself, when state attorneys

general, strapped for resources,

turned to them.

Some of those very same law-

yers are now in the opioid litiga-

tion, working for cities and coun-

ties — and, indeed, a handful of

states. Mr. Geller’s opioid clients

include Maryland’s Montgomery

County in federal court and Mary-

land itself, in state court.

While that dual representation

may prompt skepticism, Mr.

Geller said that it served the inter-

ests of time and coordination, be-

cause so much material overlaps.

At the outset of the litigation,

Judge Polster established two

parallel tracks. One is to prepare

for trial, the first of which is set for

Oct. 21 in Cleveland.

The second is to pursue negotia-

tion, to bring remedies as soon as

possible. That track has sputtered

along, mostly because the defend-

ants have pointed fingers at each

other, disputed liability and

faulted the federal government’s

role in overseeing the sale and dis-

tribution of drugs.

The concept for this negotiation

group was developed by several

law professors, who now have

roles in the opioid litigation, and

refined by the plaintiffs’ lawyers.

(The group would not include

other parties like tribes and third-

party payers.)

It uses an allocation map that

shows each municipality what

share to expect from a settlement,

calculated with federal data about

pill distribution, opioid-related

overdoses and deaths.

“All the political entities have

gotten notice about this plan,” said

Samuel Issacharoff, a law profes-

sor at New York University who

worked on the proposal, referring

to the cities and counties, “and it’s

noteworthy that we’ve heard no

substantial opposition to it.”

If Judge Polster does certify the

proposal, it is unclear whether the

states or even the defendants can

appeal.

The manufacturers’ motion

says that they “take no position on

whether the court should grant

plaintiffs’ motion,” a possible indi-

cation of their willingness to nego-

tiate.

But the distributors are fighting

hard. The plaintiffs responded by

saying, essentially, that the plan is

not about the distributors — it is

only about how to organize the

plaintiffs. If the distributors do not

like the plan, the plaintiffs’ law-

yers wrote, “fine. Don’t negotiate

with it. Don’t settle with it.”

Nonetheless, added Mr. Geller,

who represents Los Angeles, “it’s

time to try to land the plane.”

A Clash Over Handling Potential Opioid Settlements

By JAN HOFFMAN

A hearing before Judge Dan A. Polster on a plan to jump-start settlement negotiations is scheduled for Tuesday in Ohio.

MADDIE MCGARVEY FOR THE NEW YORK TIMES

Cities bypassed states

after large portions

of tobacco payouts

were redirected.

L Brands, the parent company of

Victoria’s Secret, is losing its long-

time chief marketing officer Ed

Razek, a departure that adds to

the turbulence at the once-domi-

nant lingerie company.

Mr. Razek is retiring, according

to a note sent to employees by

Leslie H. Wexner, the company’s

chief executive.

Victoria’s Secret — which for

years defined female sexiness for

many Americans — is struggling

to reinvent itself in the #MeToo

era. The company recently hired

its first openly transgender lin-

gerie model, Valentina Sampaio,

22, for a photo shoot. The Brazilian

model’s agent, Erio Zanon, said

that Ms. Sampaio would appear in

marketing for VS Pink, the com-

pany’s athletic line.

The marketing executive made

headlines last year when he said

in an interview with Vogue that

Victoria’s Secret should not cast

“transsexuals” in its fashion show

“because the show is a fantasy.”

Mr. Razek later apologized for his

“insensitive” remarks.

The departure also comes as L

Brands rushes to distance itself

from the scandal involving Jeffrey

Epstein, who was arrested last

month and charged with sex traf-

ficking involving girls as young as

14. For many years, Mr. Epstein
    was a close personal adviser to
    Mr. Wexner.
    L Brands has said it hired out-
    side lawyers to to review the rela-
    tionship between Mr. Wexner and
    Mr. Epstein.
    In his note to employees on
    Monday, which was reviewed by
    The New York Times, Mr. Wexner
    said that “there are few with Ed’s
    passion and talent in this indus-
    try.” Mr. Razek’s duties will be
    temporarily filled by Ed Wolf, the
    company’s senior vice president
    of brand and creative, along with
    Bob Campbell, the vice president
    of creative for Victoria’s Secret.
    Mr. Razek’s retirement was first
    reported by The Wall Street Jour-
    nal.
    After joining the company in
    1983, Mr. Razek has been key to
    developing the company’s heavily
    sexualized lingerie campaigns
    and its annual fashion show ex-
    travaganza. But as retailers and
    media groups such as American
    Eagle Outfitters and Playboy be-
    gan to shift away from overt dis-
    plays of skin toward marketing
    that focused on body positivity,
    Victoria’s Secret grew discon-
    nected from the cultural zeitgeist.

Victoria’s Secret

Loses Its Chief

Of Marketing

By TIFFANY HSU

and EMILY STEEL

Katherine Rosman contributed

reporting.

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