McLean-based Gannett on Tuesday said that it plans to split into two publicly traded companies, an action that follows similar shake-ups at other major media companies as they grapple with a changing landscape in the news business.
The separation is to create one company dedicated to digital and broadcasting businesses and a second company that focuses on publishing and includes its flagship newspaper, USA Today.
“These are two extremely compelling actions at precisely the right time, and we believe they represent a one-two punch that will position all of Gannett’s businesses for even greater success and growth,” said Gannett chief executive Gracia Martore in a conference call with investors Tuesday morning.
Martore is to become chief executive of the not-yet-named digital and broadcasting company, which includes 46 television stations and digital destinations such as CareerBuilder. This company would also include Cars.com, a Web site that Gannett plans to fully acquire.
Gannett is a partial owner of Cars.com and announced Tuesday that it intends to take full ownership of the business, purchasing a 73 percent stake from Classified Ventures for $1.8 billion. The deal values the site at $2.5 billion. District-based Graham Holdings owns a 16.5 percent share in Classified Ventures. The sale comes as Graham Holdings aims to reposition itself after the firm, previously known as The Washington Post Co., sold The Washington Post newspaper and other media properties last year to Amazon.com chief executive Jeffrey P. Bezos.
The Gannett name will be retained by the publishing company and will be led by Robert J. Dickey, a long-time Gannett leader who now serves as president of Gannett’s U.S. and Community Publishing group. In addition to USA Today, that company will include 81 local newspapers and their affiliated Web sites, as well as hundreds of weekly magazines and trade publications.
Gannett said it expects both companies to keep their headquarters in McLean.
Martore said in the conference call that the separation would allow the stand-alone Gannett businesses to have an “even sharper management focus and resources more directly aligned with their individual needs and priorities.”
Several other media companies have recently moved to spin off a publishing division. Time Warner hived off its magazine group; Rupert Murdoch’s News Corp. last year divided into two firms, with one company housing its publishing business and another its broadcast and entertainment businesses. This week, The Tribune Co. completed a separation that created Tribune Media Co. and Tribune Publishing Co.
“The separation [Gannett is] pursuing is pretty similar to the one Tribune has pursued in terms of grouping the broadcasting and digital,” said James C. Goss, managing director of Barrington Research Associates. “Except Gannett has the added bonus of not assigning any debt to [the publishing half], which probably gives it an advantage as it heads into a post-combined world.”
All of Gannett’s debt will be retained by the digital and broadcasting company after the split.
Goss added that Gannett is different from many other publishing conglomerates in that it owns many newspapers in small and mid-size markets that may contain information that is hard to get elsewhere, such as high school sports results.
In that way, Goss said, they are “maybe not bulletproof, but are a little bit insulated from the national media duplicating what they have to offer,” Goss said.
Still, independent media analyst Craig Huber of Huber Research Partners notes that Gannett will face challenges in boosting its publishing business, as it has already cut more than a third of the costs from its newspaper division since 2007.
“It’s going to get harder and harder to take costs out, whether it’s a stand-alone newspaper company or not,” Huber said.
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