Will Gannett Spin Off Papers?

Isolating expanded TV group from print division may give stations more room to grow
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Gannett could create significant shareholder value by spinning off its newspaper division and allowing its expanded station group to flourish, reports Bloomberg.

Other media giants, including Tribune, News Corp. and, going back to 2008, Belo, have done just that, giving the faster growing broadcast properties room to grow without being dragged down by ailing print.

“Purer play companies allow management to put more focus and attention on the respective businesses,” said Barry Lucas, senior VP at Gabelli. “There is value to be surfaced here.”

Lucas estimated the company could be valued at about $40 a share, 41 percent higher than yesterday’s closing price of $28.27, if broken into pieces. His projection is the highest among the five sum-of-the-parts estimates compiled by Bloomberg.

Bloomberg says:

While Gannett’s stock price surged after the purchase of Belo, the newspaper unit is still dragging the company’s profit multiple down to the lowest among U.S. media peers, data compiled by Bloomberg show. Splitting off the newspapers would give Gannett a stronger stock currency to buy more local TV stations, FBR & Co. said.

Asked about the option in July, Gannett CEO Gracia Martore said, “we never rule anything out.”

The Belo acquisition transformed Gannett into primarily a local TV company, though the stations have driven the bottom line for some time.

Says Bloomberg:

Before the acquisition of Belo, newspaper publishing revenue of $3.7 billion accounted for about 70 percent of Gannett’s revenue and 43 percent of its operating income in 2012. Broadcasting made up 17 percent of revenue and 52 percent of the profit, data compiled by Bloomberg show.

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