Gannett to Take Complete Stake in Cars.com, Plans to Split - Analyst Blog

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Gannett Co., Inc. ( GCI ) has agreed to take the complete ownership of Cars.com for about $1.8 billion. The diversified media conglomerate already has a 27% stake in this auto-sales website, and the full-acquisition accord, values the business at approximately $2.5 billion.

Cars.com gives online visitors with price checks, model comparison and dealer reviews. Launched in 1998, Cars.com is owned by Classified Ventures, a consortium of five companies. Apart from Gannett, other companies that form the joint venture are Tribune Media Co., The McClatchy Company ( MNI ), A. H. Belo Corporation ( AHC ) and Graham Holdings ( GHC ). Earlier this year, Classified Ventures also divested Apartments.com for about $585 million.

Gannett also announced that it will split its business into two separate entities, one completely focusing on Broadcasting and Digital businesses and the other concentrating on Publishing. The bold step is in line with the Tribune Company that spun off its newspaper business into a publicly traded company Tribune Publishing Company ( TPUB ). News Corporation ( NWSA ) and Time Warner Inc. ( TWX ) have also separated their broadcasting and digital properties from sluggish print business.


Gannett informed that following the split, the two companies will remain headquartered in McLean, Virginia. While the Publishing business will be christened as Gannett, the name of the Broadcasting and Digital company is yet to be decided. Gracia Martore will spearhead the Broadcasting and Digital company, while Robert J. Dickey will serve as CEO of the Publishing company.

For quite some time now, Gannett has been making endeavors to expand its presence in broadcasting and digital products with a view to lower its dependency on its soft print media business as well as traditional advertising and therefore reduce susceptibility to economic conditions.

The recent news of Gannett taking over Cars.com underscores the same. Prior to this, the company bought six television stations of London Broadcasting Company and also acquired television-station operator, Belo Corp. We believe this will transform Gannett's business model, which was largely focused on low margin newspapers to a high-margin multi-media business. 

Apart from business model diversification initiatives to add revenue streams and counter any economic onslaught, Gannett is adapting to the evolving multi-platform media universe, which currently includes Internet, mobile, social media networks and outdoor video advertising. The company is also realigning its cost structure and streamlining operations to increase efficiencies.

Gannett also initiated a subscription-based model and commenced Digital Marketing Services in top markets to generate new advertising and marketing revenues sources. Other publishing companies such as Journal Communications, Inc. ( JRN ), The New York Times Company ( NYT ) and The E.W. Scripps Co. ( SSP ) are also trying to include different revenues generating ways.

Recently, Journal Communications and E.W. Scripps entered into a deal to merge their broadcasting operations and spin off the newspaper business into a separate entity, Journal Media Group. Earlier, The New York Times Company had offloaded assets that bear no direct relation with the core operations in order to re-focus on its core newspapers and pay more attention to its online activities. The company is also contemplating on a new line of digital products and services.

The current economic situation does not hold promises for publishing companies, which are already struggling to withstand waning print advertising demand. Thus publishing companies are now concentrating on profitable areas and adding new revenue generating avenues in their portfolio.

Gannett currently holds a Zacks Rank #3 (Hold).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: NYT , TWX , NWSA , GCI , SSP

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