Gannett to spin-off newspapers from broadcasting, acquires remaining shares of Classified Ventures for $1.8 billion in cash
Spin-off will combine broadcast properties with digital, while publishing will go it alone, separated from the online classified business
The spin-off craze continues this morning with the news that Gannett, the publisher of USA Today, will create two new companies, one for its broadcast properties and one for its publishing properties.
Along with the spin-off, Gannett said it would acquire the 73 percent interest in Classified Ventures LLC it does not already own for $1.8 billion in cash.
Although the future of publishing is digital, Gannett will give the digital businesses, which includes Cars.com, to its broadcast business – leaving its publishing business having to compete against Classified Ventures.
“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,” Gracia Martore, president and chief executive officer, said.
“Cars.com doubles our growing digital business, while our recent acquisitions of Belo and London Broadcasting doubled our broadcasting portfolio. These acquisitions, combined with our successful initiatives over the past 2-1/2 years to strengthen our Publishing business, make this the right time for a separation into two market-leading companies.”
The publishing arm will retain the Gannett name while the broadcast and digital company has yet to be named.
The publishing division would still be the largest portion of Gannett’s business except for the acquisition of Classified Ventures, which makes the two sides more equal now. Gannett has also been investing in broadcast acquisitions of late to grow that side of the business.
Last quarter the broadcast side saw its revenue dramatically increase by nearly 88 percent thanks to its acquisitions and stronger performance, while its publishing side saw ad revenue fall 5.7 percent.
The Tribune Company recently split off its newspaper division into a new company called Tribune Publishing which starts trading on the NYSE this morning. The new company, which includes the Los Angeles Times and the Chicago Tribune will start off life heavily in debt and with the new digital ventures division reporting to broadcasting rather than publishing. Rupert Murdoch also believed in divesting print assets when he spun out publishing from the rest of News Corp, though he did give the new publishing company a cash reserve rather than saddling it with debt.
Another version of the spin-off was implemented by Journal Communications and E.W. Scripps. The two companies last week announced it would swap their broadcast and publishing businesses to create two new companies. Journal Communications gains Scripps’s newspapers and became Journal Media, while Scripps gained the other’s broadcast properties, then retained the E.W. Scripps name.