THE market capitalisation (cap) of the Gleaner Company Ltd and Radio Jamaica Ltd (RJR) collectively rose by $1.2 billion, sending both stocks to 52-week highs following last week’s acquisition announcement.

The Gleaner Company Ltd’s market cap or value of shares outstanding rose by two-thirds in under a week (between August 5 to August 11) from $1.57 billion to $2.6 billion; comparatively RJR’s market cap increased by 18 per cent from $1.2 billion to $1.42 billion over the same period.

The Gleaner and RJR respectively, operate the oldest print and broadcast media entities in the island. It’s rare for these established stocks to rapidly fluctuate in price over a short period. But investors have taken note that RJR will issue 1.2 billion shares to Gleaner shareholders as payment for the Gleaner Company (Media) Limited subsidiary.

Year to date the stock price of the Gleaner and RJR increased by 152 per cent to $2.15 and 254 per cent to $4.00 respectively.

“Shareholders in The Gleaner Company Limited will receive one RJR share for every share they now hold in the Gleaner Company. This is accounting for the media business which has been sold by the Gleaner Company to RJR. For the part of the Gleaner Company that has not been sold to RJR, Gleaner shareholders will continue to hold their present shares in the non-media company (which as a part of the sale agreement is to be renamed “1834 Investments Limited”),” according to statements on a dedicated page on the Gleaner’s website entitled the RJR/Gleaner Merger Q&A.

Last Wednesday RJR announced that it would acquire the media assets of the Gleaner Company. The acquisition is reportedly subject to the approval of shareholders and the Jamaica Stock Exchange, as well as the Supreme Court. Subsequently, the acquired Gleaner media operations will be consolidated with those of RJR. Shareholders of the Gleaner Co Ltd will hold 50 per cent of the consolidated entity with existing shareholders in RJR holding the remaining 50 per cent.

“So that Gleaner shareholders can be compensated for the media business that RJR is acquiring from them, RJR will pay the Gleaner shareholders using RJR shares. To get to 2.4 billion shares that will then be shared equally between the shareholders of both companies, RJR will do a combination of a share split and issues of new shares. 1.2 billion of the shares will be given to Gleaner shareholders as the payment for the Gleaner Company (Media) Limited subsidiary,” according to statements on a dedicated page on the Gleaner’s website entitled the RJR/Gleaner Merger Q&A.

The acquisition aims to address the challenging media environment marked by increased competition and reduced advertising spend.

“The current global and local economic environments make the coming together necessary, as both companies operating separately would have had to invest considerably in building out platforms and services in order to become full-service multimedia entities. The combination allows for better capital management, which ultimately benefits customers and shareholders,” the dedicated page on the merger indicated.

The statement added that the acquisition would allow both entities to benefit from digital revenue streams, seen as a key revenue earner in the future.

“Digital transitioning is most relevant globally for expansion and survival; it is a key growth area for traditional media businesses. The industry, through digital innovations, is at present in an expansion phase with operations and reach transcending geographical boundaries and with business models being more robustly monetised. Digital media, therefore, continues to be a key priority for the merged entity going forward. If as the leading media entities we miss this digital phase, the information and communications sector in the country will be retarded for a long time,” according to the statement.