Are Investors Undervaluing The Gannett Restructuring?

Investors are coming to grips with a series of restructuring announcements from media company Gannett (NYSE: GCI) as they try to value the stock.

Analyst Commentary

Noble Financial is the first sell side research house to comment on the transformation.

"We view the moves favorably, as the sum of the parts should be greater than the whole," commented Nobel analyst Michael Kupinski. "Each remaining company will be able to pursue acquisition growth opportunities.”

Specifically, Gannett's print business will be left without debt, allowing for acquisition power in a time of drastic consolidation. The broadcast and digital business will have a strong balance sheet, with estimated debt at 2.8 times EBITDA.

Speaking on CNBC, Jim Cramer thinks the deal should add more value than the 0.1 percent increase in share price suggests.

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Two Publicly-Traded Companies

Gannett will split its broadcasting and digital business from its publishing business with an IPO of the latter. Proceeds of the offering will be paid to broadcasting and digital shareholders.

The publishing business will maintain ownership of the USA Today, along with 81 local newspapers, 200 weekly print publications and several other groups.

The broadcasting and digital business will include 46 television stations, including NBC, CBS and ABC affiliates. The newly announced acquisition of Cars.com will join CareerBuilder on the digital platform.

Cars.com

Gannett is buying the 73 percent of Cars.com that it does not already own, to add to its digital portfolio. The second-largest auto site on the web is expected to contribute $155 million of incremental revenue and increase free cash flow by $0.43 per share.

Terms of the deal were not disclosed.

CEO Gracia Martore says the moves will help “all of our businesses to compete effectively in today's increasingly digital landscape. Cars.com doubles our growing digital business, while our recent acquisitions of Belo and London Broadcasting doubled our broadcasting portfolio.”