Gannett is splitting its business into two separate, publicly traded companies. One will be the publishing division, including USA Today, USAToday.com, and 81 newspapers across the US. The other company will hold Gannett's digital and broadcasting properties. That will include 46 television stations, as well as Cars.com and CareerBuilder.com.
Gannett will also pay $1.8 billion in cash to acquire the remaining 73% of Cars.com that it does not currently own. The digital business alone will take on the debt related to the acquisition.
"This represents a one-two punch that will position these businesses for growth,” said Gannett CEO Gracia Martore in a call with investors. She will continue as CEO of the digital and broadcasting business.
The split speaks to the different valuations and forecasts for the newspaper and television businesses. "Wall Street does not value print media the way it values broadcast," said Peter Krasilovsky, VP and senior analyst for BIA/Kelsey. "We haven't had illusions about 'synergies' between print and broadcast for several years."
Cars.com will give Gannett’s digital business access to a large amount of local advertising revenue. “Cars.com doubles our growing digital business,” said Martore. It has 30 million visits per month and displays 4.3 million cars from 20,000 dealers, making it “one of the few proven and established digital solutions of scale in this market,” Gannett said in its release. Cars.com also recently changed its agreements with its affiliates to make the terms more favorable to Cars.com, which is expected to further improve the margins of the business.
"Cars.com is a very strong company with a lot of growth prospects. We see a lot of promise in there," said Krasilovsky. Cars.com is the number-two player in the auto advertising space, second to Cox-owned AutoTrader.com.
More acquisitions may be ahead for the newly formed publishing business. It will now have little debt, putting the company in a better position to pursue strategic acquisitions, explained Martore. Previously, cross-ownership rules and regulations prevented the company from acquiring different newspaper properties "more often than you would think."
Krasilovsky notes that Berkshire Hathaway has been picking up small, undervalued metro newspapers. Gannett could enter the marketplace for those deals, to "fill holes in their coverage areas."
The publishing division's new CEO will be Robert J. Dickey, who was president of the US Community Publishing division.
Among Gannett’s holdings is rich media provider PointRoll and local advertising solution BLiNQ Media. It’s not immediately clear in which division they will reside, though both companies will maintain preferred relationships with each other wherever possible. "We will continue to collaborated on cross-platform sales and content sharing where able," Martore said.
Gannett is not the only publishing business to separate recently. Struggling Time Inc. was recently spun off from its parent company, with the intention to allow the company reinvent itself while standing on its own, although it was saddled with over $1 billion in debt in the spinoff. Last week, Tribune Co. separated its broadcast business from its newspaper business. Last Wednesday, Scripps announced a merger Journal Communications. That company's radio and broadcast properties would be folded into Scripps, while both companies' respective newspaper publications would form Journal Media Group, which would have an imprint in 14 markets.
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