Gannett to Separate Broadcasting, Publishing Businesses Via Spin-Off
Gannett Co., the publisher of USA Today, said Tuesday it would create two publicly traded companies by separating its broadcasting and digital businesses from its publishing operation.
The planned separation of the publishing business will be take place via a tax-free distribution of Gannett’s publishing assets to shareholders and is expected to happen in mid-2015. "The transaction will create two focused companies with increased opportunities to grow organically across all businesses as well as pursue strategic acquisitions," the company said.
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The move follows the split of Tribune into an entertainment and publishing business, which was completed late Monday, the split of News Corp and 21st Century Fox and Time Warner's spinoff of Time Inc.
Gannett also has signed a definitive agreement to acquire full ownership of Cars.com. Gannett will acquire the 73 percent interest that it does not already own in Classified Ventures, which owns Cars.com, for $1.8 billion in cash. The deal was reached with Tribune Media, the post-split broadcast and digital business, and other current owners.
Said Gannett CEO Gracia Martore: "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. Cars.com doubles our growing digital business, while our recent acquisitions of Belo and London Broadcasting doubled our broadcasting portfolio."
She added: "These acquisitions, combined with our successful initiatives over the past two-and-a-half years to strengthen our publishing business, make this the right time for a separation into two market-leading companies.”
Gannett expects the publishing business to be "virtually debt-free" after the separation, with all of Gannett’s existing debt retained by the broadcasting and digital company. That is a key difference compared with the Tribune separation.
Following the Gannett separation, the new broadcasting and digital company, which has yet to be named, will remain headquartered in McLean, Va. Martore will remain its CEO.
The business will include 46 TV stations that the company owns or services, making it the largest independent station group of major network affiliates in the top 25 markets. The company’s stations reach approximately one-third of all TV households nationwide and represent the No. 1 NBC and CBS affiliate groups and the No. 4 ABC affiliate group. Its digital business will consist of such sites as Cars.com and CareerBuilder.
The publishing company, meanwhile, will retain the Gannett name, also remain headquartered in McLean and be led by Robert Dickey, currently president of Gannett’s U.S. community publishing arm, as CEO.
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It is the largest U.S. newspaper publisher, led by flagship paper USA Today, 81 local daily publications, as well as U.K. regional community news provider Newsquest.
"These transformative transactions will give both the publishing company and the broadcasting and digital company enhanced strategic, operating, financial and regulatory flexibility to pursue growth and consolidation opportunities in their respective markets, while delivering strong cash flow to build further upon Gannett’s long-standing traditions of award-winning journalism and service to our local communities," Martore said. "We are creating two companies that will be among the largest and strongest in their peer groups, with increased abilities to focus resources on the most promising areas of their businesses."
The Cars.com deal was reached with Tribune Media, McClatchy, Graham Holdings Co. and A. H. Belo. Tribune Media estimated its pre-tax, cash proceeds will be $686 million, with after-tax proceeds of approximately $425 million.
“We are proud of Tribune’s role in building Cars.com over the years, and we are pleased today to be providing a significant return on that investment for our shareholders through this transaction,” said Tribune Media president and CEO Peter Liguori.