Gannett (GCI) splits media into two companies, buys Cars.com
Gannett Company (GCI) announced Tuesday that it will spin off its publishing business from its broadcast and digital business. Gannett also announced it will take full ownership of Cars.com.
Gannett is splitting its broadcast and publishing business in two, joining other major media players in allowing fast growing TV and digital operations to operate more freely and not be weighed down by the declining newspaper business.
The media company also announced Tuesday that it would take full ownership of Cars.com for $1.8 billion.
The spinoff of the publishing unit follows similar maneuvers by other major operators like Time Warner Inc., News Corp. and the Tribune Co., which completed a split with its division that publishes The Los Angeles Times and other newspapers on Monday. Media companies have been taking action to separate sluggish newspaper operations from more profitable broadcast units, as the industry adapts to consumers' increasing taste for digital content.
CEO Gracia Martore said the "bold actions" will help increase value for shareholders "in today's increasingly digital landscape."
Last year Gannett acquired Belo Corp. for about $1.5 billion, almost doubling the number of TV stations it controls. Talk of a split was raised almost immediately as the broadcast division's dominance grew over the publishing wing, something that has happened across the media sector as digital media evolves.
Gannett Co. said Tuesday that the publishing business will basically be debt free once spun off, with the broadcasting and digital businesses holding the existing debt.
Gannett's broadcasting business now operates 46 television stations. The digital business includes websites such as CareerBuilder and will also now include Cars.com. The publishing company will house USA Today as well as 81 local U.S. daily publications and Newsquest, a regional community news provider in the U.K.
The publishing business will keep the Gannett name, while the broadcasting and digital company has yet to be named. Both companies will remain headquartered in McLean, Virginia. The broadcasting and digital company will trade on the New York Stock Exchange. The publishing business is also expected to trade on the NYSE.
Gracia Martore will serve as CEO of the broadcasting and digital company. Robert J. Dickey, currently president of Gannett's U.S. Community Publishing division, will become CEO of the publishing company.
If approved by its board, Gannett anticipates distribution of shares of the new entity holding the publishing business to be completed by the middle of next year.
Gannett is buying the 73 percent interest in Classified Ventures LLC, owner of Cars.com that it doesn't already own. Cars.com lets people compare vehicles online and connects them with sellers and dealers. The web site displays about 4.3 million new and used cars from nearly 20,000 dealers.
Gannett will finance the Cars.com transaction with available cash, approximately $650 million to $675 million in new senior notes and borrowings under its revolving credit agreement. The deal is expected to close in the fourth quarter.
Gannett's stock rose $1.15, or 3.4 percent to $35.47 in premarket trading shortly before the market open, but had fallen to $34.15 by mid-morning.
Spinning off publishing companies has been a recent trend. The Tribune Company also spun off its publishing business, which include The Los Angeles Times and The Chicago Tribune. On Tuesday, Tribune Publishing (TPUB) began trading on the New York Stock Exchange. By mid-morning the stock was trading at $21.98.
“We will be a company that has a greater percentage of its revenue coming from digital sources,” Jack Griffin, the new company’s chief executive, told The New York Times in a phone interview last week.
Rupert Murdoch's News Corp. and E.W. Scripps also completed spin offs of their publishing businesses. In June 2013, News Corp. spun off its newspaper holdings, which included The Wall Street Journal. And then last week, The E.W. Scripps Co. and Journal Communication merged their broadcast companies but spun off the publishing business, which prints the Milwaukee Journal Sentinel.
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