Newspaper report spurs Belo


Shares of Belo Corp. jumped 18.7% on Monday after the media firm said it will separate its newspaper and television station assets into two stocks.

The announcement was a response to recent pressure from shareholders, who have said that diversified media companies like Belo would see better stock prices if they allowed investors to track their TV businesses separately as local TV is considered to be in a better position than the sluggish and challenged newspaper market.

Management at media firm E.W. Scripps Co. in January acknowledged that it had been considering a separation of its TV and newspaper businesses (HR 1/31). But while Scripps brass argued that newspaper weakness has held its stock back, it decided to keep its operations together.

However, investors seemed to see potential for similar separations as announced by Belo as they bid up various stocks of companies that own newspaper and TV assets.

Belo's stock closed at $20.61 after going as high as $21.99 — up about 27% and close to its 52-week high of $22.94 — in intraday trading. It was the biggest gainer Monday on The Hollywood Reporter Showbiz 50.

The Class A stock of Media General advanced 9% on Monday to $29.99. It has traded between $26.68 and $43.94 during the past 52 weeks. Gannett saw its shares rise 1.1% to $44.20. They have traded between $43.63 and $63.50 during the past year.

"Gannett ought to take a page from Belo," Benchmark analyst Ed Atorino said. "Its stock is very underappreciated and the lowest valued in the group except for Journal Register, which is off the radar screen." Shares of Journal Register, whose one-year range stands at $2.33-$8.60, closed up 2.9% at $2.47.

Media General also is a candidate for a separation, Atorino said.

Belo management previously argued that its newspaper business was too small to stand on its own. But it said Monday that its board has unanimously approved a spinoff of its newspaper business in a tax-free distribution to current shareholders in early 2008.

Current Belo chairman and CEO Robert Decherd will serve as chairman, CEO and president of the newspaper firm, to be called A.H. Belo.

The TV business will retain the Belo Corp. name and be run by Dunia Shive, who currently serves as president and COO and will become president and CEO of the new entity.

The company said that the new Belo Corp. will be "the largest pure-play publicly traded television station company in the nation," with about 3,200 employees and annual revenue of more than $750 million.

It owns and operates 20 TV stations, including ABC, CBS, NBC, Fox, CW and MyNetwork affiliates, reaching 14% of U.S. TV households. It operates nine stations in seven of the top 25 U.S. markets. Belo also owns the 24-hour regional cable news channels Northwest Cable News and Texas Cable News.

"The decision to create separate television and newspaper companies recognizes the profound yet distinct changes occurring in these industries and the appeal of the separate businesses to discrete investor groups," Decherd said. "This action should provide shareholders with greater insight into each business, while making each business more nimble and better able to allocate capital to compete and grow within its respective industry."