Gannett Follows Murdoch Splitting Holdout TV-Newspaper Pairing

Aug 05, 2014 11:22 am ET

Aug. 5 (Bloomberg) -- One of the last remaining unions between newspapers and TV is coming apart.

More than three decades after a merger that tethered newspapers with television broadcasters, Gannett Co. Chief Executive Officer Gracia Martore is the latest media executive to decide that her 46 TV stations and 81 U.S. daily newspapers, as well as USA Today, are worth more apart than together.

Belo Corp. kicked off the trend in 2007, announcing the isolation of its faster-growing local TV stations from newspapers, such as the Dallas Morning News, that were facing plunging advertising revenue as readers moved online.

Rupert Murdoch caught on two years ago and completed the split of News Corp. and 21st Century Fox Inc. last year -- segregating newspapers like the Wall Street Journal from TV gold mines such as Fox News and FX. Tribune Co. jumped on the bandwagon a year ago, and just today its broadcasting and publishing businesses started trading independently.

The allure of the combined arrangements faded as readers, marketers and classified listings migrated to the Internet, reducing newspapers’ advertising and circulation revenue. The publishing arms started to become a drag on growing broadcast and TV operations. Now, the theory is that the separated businesses will attract unique shareholders willing to value the operations more on their own.

Bewkes Playbook

One of the oldest hats at the splitting game is Time Warner Inc. CEO Jeff Bewkes. He dusted off the spinoff playbook earlier this year to separate Time Inc. magazines after cleaving off cable systems and AOL in prior years.

Ultimately, getting smaller may really be all about getting bigger. With Time Warner, for instance, Bewkes gradually made the company a more attractive takeover target by winnowing the business down to cable networks and production of movies and TV shows. Since June, the same month that Bewkes completed the last spinoff, he has been fending off a $75 billion takeover offer from Murdoch’s Fox.

E.W. Scripps Co. has been through this more than once. Just a few weeks after Belo decided to split in 2007, E.W. Scripps said it would separate its cable networks and Internet properties. Then, last week, E.W. Scripps and Journal Communications Inc. agreed to merge in order to combine their broadcasting operations and spin off their newspapers.

Martore acknowledged on a call today that more deals may be in the future for McLean, Virginia-based Gannett’s almost-debt- free newspapers.

“They’ll be able to opportunistically and in a disciplined way, look at opportunities as they come up without constraints,” she said. “They can do a variety of acquisitions and investments without levering up that business.”

The dealmaking already started for the digital side of Gannett’s business. At the same time as announcing the split, Gannett said it agreed to buy the rest of Classified Ventures LLC, the parent company of Cars.com, for $1.8 billion in cash.

--With assistance from Caitlin McCabe in New York.