Gannett's Split Makes Sense Even as Growth Remains Elusive

NEW YORK (TheStreet) -- Long known for its national newspaper USA Today, Gannett (GCI) is poised to split into two: one company for its collection of legacy print publications, and the second for its television and digital entities led by and CareerBuilder.

Splitting off Gannett's newspaper is all about unlocking the value of its television station group, which accounted for 27% of its first-quarter revenue of $1.47 billion but 70% of its operating value. So far this year, investors have warmed to the story: Shares of Gannett, of McLean, Va., are, at %35.75, up 12% this year, extending its 12-month advance to 24%.

"It's a very smart move on Gannett's part, and that's been helping the stock of late," says Craig Huber, a media analyst for Huber Research Partners. "There's no reason to have newspapers and TV stations in the same portfolio. There's not much cost savings they have together."

The publishing assets and their affiliated digital publications, including the flagship USA Today, will retain the Gannett name while the TV stations and digital platforms will be grouped in a company called Tegna.

Gannett expects the transaction to be completed by June 29. Existing shareholders will keep the same number of Tegna shares and receive one share of Gannett for every two they own now.

Yet, splitting Gannett in two doesn't resolve the challenges confronting both publishing and local televisions: how to find growth when advertisers are moving to digital in an effort to appeal to younger viewers who are spending more time on mobile devices. Television station groups are discovering that the migration to digital is curbing sales in the way that newspapers were hit some 10 year ago. 

If you liked this article you might like

Tronc Has Another Makeover Project With Daily News

What's Behind Tronc's Startling Purchase of the New York Daily News

What Happened to American Society Is Happening to the Stock Market, Too: Market Recon

Megaclustering Is Coming for Your Daily Newspaper

Why Gannett Should Take Another Stab at Tronc