Gannett Co said on Tuesday it would spin off its print operations, including USA Today, becoming the latest media company to separate slower-growing publishing assets from TV and digital properties.
In a widely expected move, Gannett joined the ranks of News Corp, Time Warner Inc and Tribune Media, which have all jettisoned print businesses as newspapers and magazines face unprecedented challenges with declines in advertising revenue and readership.
The print group which includes 81 local newspapers in the United States and the British newspaper arm Newsquest, will retain the Gannett name and split from its 46 TV stations and digital properties including classified listing sites Cars.com and CareerBuilder in a yet to be named company.
Additionally, Gannett announced it took full ownership of Cars.com buying the 73% stake in Classified Ventures for $1.8 billion from its joint venture partners McClatchy Co, Graham Holdings Co AH Belo and Tribune Media.
"We decided this was the right moment in time to do this," Gracia Martore, chief executive of Gannett, said in an interview.
"We are separating into two strong (companies) with the ability for each of them to pursue growth opportunities." Several times during a conference call with analysts Martore stressed that the newspaper company will be "virtually debt free" -- a move that takes a page from Rupert Murdoch's play book.
Murdoch made sure to fortify News Corp, which is now home to his publishing assets, with no debt and about $2.5 billion in cash when he split it from the entertainment and cable properties now known as Twenty-First Century Fox.
Tribune and Time Warner saddled their publishing arms with debt when they spun out their newspapers and magazines into separate companies.
Martore said that freed from cross-ownership restraints -meaning the current company cannot own a TV station and newspaper in the same market - Gannett's newspaper group could go on an acquisition spree.
Shares of Gannett were almost flat at $34.29 during noon trading.
Gannett has been busy diversifying away from its newspaper assets with big broadcast TV acquisitions over the last year. It bought Belo and London Broadcasting, doubling its TV holdings.
The new broadcasting company will retain all the digital properties because they are faster growing and have similar capital structures, Martore said. Cars.com and CareerBuilder, the recruitment site, will retain affiliate agreements with the newspapers.
Still, the publishing assets will face an uphill battle even though they will continue to operate their own digital properties including their websites.
Time Inc, the magazine division that spun out from Time Warner in June, on Tuesday reported for the first time as a standalone company and cut its full year revenue forecast.
Shares of Time Inc are up about 17% since the separation. Tribune Publishing, the group of newspapers that include the Los Angeles Times, completed its spin off on Monday. Its shares are down 2.4% at $21.57. Martore will remain CEO of the broadcasting company while
Robert Dickey, currently president of Gannett's U.S. Community Publishing division, will head the newspaper company.
Greenhill & Co was financial adviser to Gannett on the spinoff, while Wachtell, Lipton, Rosen & Katz was the legal adviser. Greenhill and Citigroup were financial advisers and Nixon Peabody LLP was legal adviser on the transaction involving Cars.com deal.
Moelis & Co advised Cars.com. Skadden, Arps, Slate, Meagher & Flom LLP was the legal adviser to the sellers.