JPMorgan bets on newspaper recovery, boosts stake in owner of USA Today to 10.2 percent

JPMorgan now top Gannett owner with 10.2 pct stake

SAN FRANCISCO — JPMorgan Chase & Co. is boosting its bet that better days are ahead for the slumping newspaper industry. It reported Tuesday that it now owns a 10.2 percent stake in USA Today publisher Gannett Co., making it the company’s largest shareholder.

JPMorgan disclosed in a Securities and Exchange Commission filing that it owned 24.3 million Gannett shares as of April 30, up from 7.4 million shares at the beginning of the year. It used a form that signals the investment is a passive one, not a prelude to a takeover attempt.

And JPMorgan didn’t make the investment with its own money; it bought the stock through investment arms that manage money for other institutions and individuals.

Publishers across the United States have been hard hit by a steep decline in print advertising that has eroded their main source of revenue during the past three years. That has led to more than a dozen bankruptcy filings by newspaper companies over the past 18 months and sagging stock prices for those avoiding that fate.

Gannett shares rose 54 cents, or 3.4 percent, to $16.58 on Tuesday. That values the JPMorgan holdings at $404 million.

Gannett shares plunged to as low as $1.85 last year. Although the stock has rebounded during the past 14 months, it remains well below its levels five years ago when it was trading above $75.

JPMorgan has acquired a more direct interest in newspapers through the recent wave of bankruptcy reorganizations. To give newspapers more breathing room, JPMorgan and other creditors have been forgiving outstanding debts in exchange for ownership stakes in several newspaper companies.

The swaps have left JPMorgan as a part-owner of The Orange County Register in southern California, the New Haven Register in Connecticut and dozens of other daily newspapers.

JPMorgan also could become a co-owner of the Tribune Co., publisher of the Los Angeles Times and the Chicago Tribune, if a proposed bankruptcy reorganization plan gains court approval.

The bank so far hasn’t said much publicly about its plans for the newspapers that it acquired through bankruptcy restructurings.

JPMorgan didn’t spell how much Gannett stock its investment arms own or how much they paid for the shares acquired since the first of the year.

The filing also gave no indication that JPMorgan is unhappy with Gannett’s current management or that it will seek a seat on the company’s board. Gannett spokeswoman Robin Pence said JPMorgan is currently a passive investor in the company. She declined further comment.

If JPMorgan’s investment managers believe the worst is over for newspapers, then it makes sense to invest in the largest such publisher in the United States, Benchmark Co. analyst Edward Atorino said.

Besides USA Today, Gannett owns more than 80 other daily newspapers scattered across the country. Although they aren’t as well known as USA Today, Atorino said, many of the smaller dailies are their communities’ best sources for local news and remain attractive advertising vehicles even as less expensive Internet alternatives divert marketing dollars from print.

Since the end of 2006, Gannett’s annual publishing revenue has plunged by $2.5 billion, or nearly 40 percent, to $4.1 billion last year. The company has remained profitable mainly by cutting costs through layoffs, hiring freezes, furloughs and other austerity measures.

Gannett raised hopes for a turnaround as the decline in its ad revenue decelerated to about 8 percent during the first three months of the year. That was better than the 18 percent drop during the final three months of 2009 compared with the same period a year earlier.

Other opportunistic investors also have been wagering on a newspaper comeback. Angelo, Gordon & Co. and Alden Global Capital, two firms that invest in troubled businesses, have also become co-owners of newspapers that have gone through bankruptcy reorganizations.