Media company, Gannett announced plans to spin-off the print division of the company, which includes 81 daily newspapers including USAToday. The publishing company will retain the Gannett name will also include Newsquest, a British news company. The news Tuesday makes Gannett the latest breakup of a major media company.
The break up of Gannett is a separation of the print division from the broadcast division which has seen a rapid expansion. This move follows in the basic footsteps of other media giants, It follows the Time Warner, Tribune Co., and News Corp.
Gannett’s new print division will start with a clean slate. Zero debt will be allocated to the new print division. In June, the Time Warner spin-off netted a debt of $1.3 billion while the Tribune Publishing Co. will be facing a $350 million deficit on Tuesday when it begins trading on the New York Stock Exchange. This puts USAToday’s parent Gannett spin-off on strong ground, allowing the company to develop projects and acquisitions that would not have been possible under a large debt dollar amount. While starting fresh, debt free, it is not quite as nice of a deal as Rupert Murdoch gave to the News Corp. print division spin-off. Murdoch’s company received a $2 billion dollar cushion just prior to the break up.
What is in store for the two new Gannett companies will be watched very closely. After Time Warner split off their print division, Murdoch pounced. His 21st Century Fox company approached Time Warner, for a potential merger. However, Time Warner rejected a $80 billion dollar bid by the Murdoch company, citing that the bid was viewed as a hostile takeover and has refused negotiations.
The possibility of one or both the new Gannett companies from this spin-off could be sold is there. While Gannett Publishing is led by the well-known USAToday newspaper, the broadcasting and digital company, which has yet to be named, could both end up being desirable acquisitions to be pursued.
The unnamed broadcasting and digital company is connected with 46 stations and will become the largest independent group of stations in the top 25 market. This is what could make the unnamed company so desirable to a potential buyer, like Murdoch. The USAToday led Gannett publishing company may also be of interest to Murdoch. Newsquest might be the carrot that would draw Murdoch in, viewing the British company as a perfect companion to his News UK group. Newspapers that are a part of News UK include The Sun, The Times and the Sunday Times were the center of a United Kingdom phone hacking scandal.
With the spin-off by Gannett of USAToday and the publishing division creating two new companies, Gannett also confirmed a $1.8 billion transaction to buy out the 73 percent the company did not own of the auto sales website Cars.com. This moves another digital asset to the new broadcasting and digital company that may increase the overall value of new company quite a bit.
By Carl Auer