Gannett Co. plans to split into two publicly traded companies by spinning off its publishing business, including USA Today, and also said it has agreed to buy full ownership of Cars.com.
Gannett will separate the publishing business through a tax-free distribution to shareholders, leaving behind a company focused exclusively on broadcasting and digital assets, according to a statement today. Gannett also agreed today to buy the 73 percent interest it doesn’t already own in Classified Ventures LLC, which owns Cars.com, for $1.8 billion in cash.
Gannett had been one of the last holdouts in an industry that’s forsaking the traditional newspaper-TV marriage. The company is now joining a long of media companies splitting publishing from broadcasting. Time Warner Inc. spun off its Time Inc. magazine division this year; Tribune Co.’s assets split as of this week; and Rupert Murdoch’s News Corp. last year became 21st Century Fox Inc. for the film and TV business and News Corp. for the newspapers.
“We view the moves favorably, as the sum of the parts should be greater than the whole; each remaining company will be able to pursue acquisition growth opportunities,” Michael Kupinski, an analyst for Noble Financial Capital Markets, said today in a note to clients. The Gannett newspaper company will “be well positioned to be a leader in what is expected to be a heightened environment for industry consolidation.”
Newspapers have steadily lost money and readership since hitting a sales peak in 2005. Classifieds advertising has been hardest hit, dropping by more than half between 2000 and 2008 to $9.9 billion, according to the Pew Research Center.
“The creation of two highly focused companies with enhanced financial and regulatory flexibility will accelerate growth and create additional value for our shareholders,” Chairman Marge Magner said in the statement.
The newspaper business will be “virtually debt-free,” the company said in the statement.
Cars.com, which was started in 1998, lets users check prices, compare models and read reviews of auto dealers.
Gannett already owned 27 percent of the auto-sales website. Classified Ventures is backed by four media companies in addition to Gannett: McClatchy Co., Tribune Media Co., AH Belo Corp. and Graham Holdings Co.
Bloomberg News reported earlier that Gannett agreed to buy the remaining stake in Cars.com for $1.8 billion, citing a person familiar with the matter.
Gannett rose 4.4 percent to $34.32 yesterday, giving it a market value of about $7.7 billion. The shares advanced as much as 9 percent in after-hours trading. Shares of McClatchy gained as much as 21 percent to $5.50 in late trading, while AH Belo added about 3.8 percent. Tribune and Graham holdings were unchanged.
In early trading today, Gannett rose 6.4 percent to $36.50 as of 7:54 a.m. New York time.