It's genius. I am talking about how Gannett will now split into two companies -- publishing and digital and broadcasting -- creating a huge amount of instant value. How can it do that? Because of the steal of Cars.com, a website that it just paid $1.8 billion to acquire the 73% stake it did not already own.
Gannett (GCI) always had a lot of hidden assets underneath its publishing empire, which includes the USA Today and a host of other newspapers including the Des Moines Register, Indianapolis Star, Arizona Republic and Nashville Tennessean.
When you consider the recently completed merger with A.H. Belo (AHC), Gannett, with 42 television stations, is now the largest independent top 25 TV station owner, covering a third of the country. It is the number one affiliate group for both CBS and NBC, as well as the fourth-largest ABC affiliate. With Cars.com it will among the top five car sellers by average visitors. Yahoo Cars is the big daddy, with 25 million unique monthly viewers. But Cars.com is clustered around 15 million, with Autotrader and Kelley Blue Book and Edmunds.
It also owns Career Builder, the largest job wanted site, with listings for more than 1.6 million jobs.
When you merge Cars.com and Career Builder, you own the largest classified business in the country. When you combine it with the broadcasting interests, you have a powerhouse of communications, one that may be worth much more than the $5 billion current valuation of the pre-split company. That's right, the new Gannett spin-off could be worth the whole company -- and you get the papers for free.
I think this split into two companies is much like when Time Warner (TWC) spun off Time Inc and immediately got a higher valuation. Old Gannett, the newspaper Gannett will be the Time Inc portion and New Gannett will be the digital/broadcast portion. Both become natural acquirers of other properties and will be on certain growth paths.
Now, here's what's really incredible. Many newspaper companies have had to file for bankruptcy over the years because of the web. Not Gannett. The other major survivor, the New York Times, had a chance to do all of these things and never executed on it. Seven years ago it sold its nine local television stations to a private equity firm for $575 million. It had a chance to dominate in real estate listings, because the vast majority of homes in New York City are sold because of digital ads from the Times. All it had to do was take a cut, and it could have used the proceeds to become Zillow (Z), or at least rival it. But the Paper of Record never thought big enough.
In short, Gannett turned out to be not just the survivor, but the thriver, all the while offering a very juicy 80 cent dividend, which the company boosted from 32 cents two years ago when people were busy writing this company's obituary. It's one of the great success stories and successful stocks of the era, and it's a reminder that no company has to bemoan the cards that it is given. You can throw in the deck, make some changes, and come out with a stock that's gone from $12 two years ago to $34 today. With this split, I think the ride is far from over.
Random musings: Tim Collins is up tonight on ChartWeek!