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Gannett Turns the Page and Continues the Transformation

NEW YORK (TheStreet) -- Gannett's (GCI) latest acquisition, six Texas television stations, announced Wednesday is another step in this company's transformation from what was seen by many as a failing newspaper business to a thriving media company.

Gannet will pay London Broadcasting $215 million in cash for the stations, in a deal that comes on the heels of the Belo acquisition, which closed in December. That $2.1 billion deal alone nearly doubled Gannet's TV station count from 23 to 40.

Yesterday's acquisition will broaden the company's presence in Texas to a total of 10 stations, without any overlap between newly acquired stations and the four the company currently owns in Austin, Dallas, Houston and San Antonio.

This is yet another step in the ongoing five-year recovery Gannett has experienced. Awash in debt and suffering from a severe downturn in advertising during the financial crisis of 2008-2009, the stock fell below $2 in March 2009. The company slashed its dividend by 90%, and many investors gave up on the company. In fact, the stock was all but priced for bankruptcy.

Shares closed Wednesday at $27.22, up nearly 24% for the year to date.

While Gannett's situation, in my view, was never quite a bleak as the market believed, the company did use the downturn to its advantage by selling off some assets, paying down debt and extending some debt maturities. More recently, the company has also been buying back stock.

Although the "crisis" seemed to be averted, investors were still quite suspicious. However, the earnings were good and cash continued to roll in. By late 2011 the company doubled its dividend, and nine months later raised it an additional 150%.

Those moves put the dividend back to half of pre-crisis levels but, more importantly, provided investors with both confidence and a solid dividend yield, which now stands at 2.9%. There may also be the wherewithal for additional dividend increases in the future.

Long viewed as just a newspaper company, it's the broadcasting segment that is now the driving force, at least in terms of operating income While broadcasting was responsible for just 16% of 2013 revenue it generated nearly half of Gannett's operating income, and that does not reflect either of the recent acquisitions. Belo was expected to be immediately accretive to earnings, while yesterday's deal, which won't close until summer, is expected to generate $50 million in revenue this year.

You've got to hand it to Gannett -- it has turned the page, quietly transformed itself and handsomely rewarded those investors willing to take a risk on the turnaround.

GCI ChartGCI data by YCharts

At the time of publication the author was long GCI.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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