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Updated, 10:08 a.m. | The Gannett Company said on Tuesday that it planned to spin off its print operations, including USA Today, becoming the latest media company to break itself up.
Gannett also confirmed that it would buy out the 73 percent of the auto sales website Cars.com that it does not already own for $1.8 billion, adding another digital asset to its portfolio.
The separation follows in the footsteps of many other media companies – from Rupert Murdoch‘s empire to Time Warner Inc. to E.W. Scripps – that have spun off their print arms in recent years.
Such transactions are intended to free faster-growing television and other media operations from less profitable newspaper and magazine businesses. Executives hope that these deals increase stock prices and allow each division to focus on its own needs. But investors have shown far more appetite for broadcast assets than newspapers, which continue to struggle as print advertising revenue keeps falling and digital advertising fails to make up for the decline.
Gannett will buy out the 73 percent of the auto sales website Cars.com that it does not already own.Credit
Gannett’s digital operations include CareerBuilder.Credit
The Gannett deal starts its newspapers on a better footing than some of its rivals since it will have no debt. That is far less than the $2 billion cash cushion Rupert Murdoch’s News Corporation gave to its print edition before its spinoff. But it is far better than the $1.3 billion in debt that Time Inc. started with when it was spun off in June, and the $350 million in debt that Tribune’s publishing company will have when it begins trading on the New York Stock Exchange on Tuesday.
Gracia C. Martore, Gannett’s chief executive, said in a conference call that the publishing division was starting from a strong position because it had no debt. She said it was open now to take advantage of acquisitions that in the past were considered unworkable.
“It has been difficult for us to look at certain acquisition opportunities,” Ms. Martore said of the existing structure. “We now have two companies that are unfettered.”
By splitting up, however, Gannett may also be putting one or both of its soon-to-be independent businesses up for grabs. Shortly after shedding its magazines, Time Warner was approached by Mr. Murdoch’s 21st Century Fox for a big media company merger that Time Warner has so far rebuffed.
Gannett said its broadcasting and digital company, which has yet to be named, would be the biggest independent group of television stations in the top 25 markets, with 46 stations that it will own or service. The company will be the biggest affiliate group for both NBC and CBS.
Gannett has moved to expand its broadcasting business in recent years, notably by buying the Belo Corporation for $1.5 billion last year to nearly double the number of stations it owns.
It will also own Gannett’s digital operations, including CareerBuilder, the huge online job website. And Gannett will soon be adding all of Cars.com, having agreed to buy out its existing partners in the venture – including the McClatchy Company, Tribune and Graham Holdings – in a deal that values the auto sales site at about $2.5 billion.
The broadcasting and digital company will be led by Ms. Martore. It will retain all of Gannett’s existing debt.
Gracia Martore, the chief executive of Gannett, will lead the broadcasting and digital company.Credit Carlo Allegri/Reuters
The publishing business, which will keep the Gannett name, will own 81 daily newspapers and the British news company Newsquest. Its flagship title will remain USA Today, which the company has sought to build out into a digital news giant.
After the publishing business is spun off to Gannett shareholders, it will be led by Robert J. Dickey, president of the company’s United States community publishing division.
“The bold actions we are announcing today are significant next steps in our ongoing initiatives to increase shareholder value by building scale, increasing cash flow, sharpening management focus, and strengthening all of our businesses to compete effectively in today’s increasingly digital landscape,” Ms. Martore said in a statement.
Advising on the corporate breakup are Greenhill & Company and the law firm Wachtell, Lipton, Rosen & Katz. Greenhill, Citigroup and the law firm Nixon Peabody are advising on the buyout of Cars.com.
Copies of USA Today newspaper are displayed in San Francisco in 2009.Credit Justin Sullivan/Getty Images
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