The company will spin off the newspaper business to shareholders and will pay $1.8 billion for the 73% stake that it does not own in joint venture Classified Ventures, which owns Cars.com.
Gannett CEO Gracia Martore described the transactions as a "one-two punch" in a Monday conference call. Shares of Gannett gained 11 cents, or 0.3%, to $34.43 on Tuesday morning.
Following the deal, Gannett's newspapers will be "virtually debt free," Martore said. The TV stations and digital media assets such as Cars.com will have about $4.6 billion in debt. Martore said the deals would provide the businesses with greater strategic freedom. "Each will be able to make acquisitions in consolidating industries," she told investors.
TheStreet's Jim Cramer gives viewers his take on Gannett's latest move:
Gannett is paying 11.7 times projected 2014 Ebitda for Classified Ventures, which is a joint venture with Tribune Media (TRBAA), McClatchy (MNI), Graham Holdings (GHC) and A. H. Belo (AHC). The payout comes to 9.2 times projected 2015 Ebitda.
The deal values Classified Ventures as a whole at $2.5 billion, or 14.6 times 2014 Ebitda, according to press releases from Tribune and A.H. Belo.
Publishing spins are in vogue among media groups.