MCLEAN, Va. (Aug. 6, 2014) — Gannett Co. Inc., which publishes USA Today, plans to spin off its publishing business in a deal that includes taking over full ownership of its Cars.com online vehicle shopping website.
Gannett said it will acquire the 73-percent interest it does not already own in Classified Ventures L.L.C., which owns Cars.com, for $1.8 billion in cash.
The transactions will create two publicly traded companies—with one exclusively focusing on Gannett’s broadcasting and digital businesses and the other on its publishing business.
The planned separation of the publishing business will be implemented through a tax-free distribution of Gannett’s publishing assets to shareholders. “The transaction will create two focused companies with increased opportunities to grow organically across all businesses as well as pursue strategic acquisitions,” Gannett said.
Gannett said it will finance the acquisition through cash on hand, the issuance of approximately $650 million to 675 million in new senior notes, and borrowings under the company’s revolving credit agreement.
Gracia Martore, Gannett’s president and CEO, said “the bold actions…are significant next steps in our ongoing initiatives to increase shareholder value by building scale, increasing cash flow, sharpening management focus, and strengthening 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. These acquisitions, combined with our successful initiatives over the past 2 1/2 years to strengthen our publishing business, make this the right time for a separation into two market-leading companies.”
Gannett expects its publishing business will be virtually debt-free after the separation, with all of the firm’s existing debt retained by the broadcasting and digital company.
Its acquisition of full ownership of Cars.com—the No. 2 auto-related site on the Internet with approximately 30 million visits per month—“further accelerates Gannett’s digital transformation and is consistent with the company’s focus on local media and marketing services,” it said.
“The automotive sector is the single largest and most important vertical for local advertising revenue, and Cars.com is one of the few proven and established digital solutions of scale in this market. Gannett will enter into new five-year affiliate agreements with the existing owner-affiliates of Cars.com upon the closing date. The company expects the transaction to be accretive to free cash flow by approximately $0.43 per share and neutral to non-GAAP earnings per share in 2015, growing thereafter.”
Cars.com allows consumers to search, compare and connect with vehicle sellers and dealers. Visits to the site have grown at an annual rate of 17 percent for the last several years, according to Gannett, and today the site displays about 4.3 million new and used cars from nearly 20,000 dealers.
Acquiring all of Cars.com is expected to contribute approximately $155 million in annual incremental 2014 pro forma EBITDA to Gannett, which includes the impact of the new affiliate agreements, the company said.
Following the business separation, the publishing company will retain the Gannett name, is expected to be listed for trading on the NYSE and will remain based in McLean. Robert J. Dickey, currently president of Gannett’s U.S. Community Publishing division, will become CEO of the publishing company, the largest newspaper publisher in the U.S.
The acquisition of Gannett’s remaining interest in Cars.com—subject to regulatory approval and other customary closing conditions—is expected to be completed in the fourth quarter of this year.
Would you feel comfortable riding in a fully autonomous vehicle?
|I’d do it in heartbeat. It sounds exciting.||
25% (51 votes)
|No way. I want to be able to control the vehicle myself.||
33% (68 votes)
|I’d give it try, but I’d rather drive myself.||
42% (87 votes)
|Total votes: 206|