First Gannett Co., Inc. (NYSE:GCI) did it. Now Tribune is doing it. Pretty soon, the entire media landscape will be different. That’s a good thing for these former newspaper companies.
The internet killed the newspaper star
The New York Times Company (NYSE:NYT) is, perhaps, one of the most revered newspapers in the world. Using the strength of this division, the company was able to expand out into new ventures. However, its heart has always been in the newspaper business. That’s partly because the company is controlled by the Ochs-Sulzberger family, which has owned the paper since 1896.
While the company has tried to change with the digital times, it hasn’t succeeded. For example, The Times sold About.com to internet scavenger IAC/InterActiveCorp (NASDAQ:IACI) in 2012 for over $100 million less than it paid. Now the company is circling its wagons around the Times brand, looking to sell off The Boston Globe and associated assets and rebranding The International Harold Tribune with The New York Times Company (NYSE:NYT) name.
This is a risky strategy for a company who’s top line has been falling since 2005. Earnings, while in positive territory last year, have bounced between black and red ink over the past seven or eight years. Aggressive turnaround types might like to take a look, but only because of the strength of the Times brand. If the company’s image falters, there’s little reason to like the shares.
A different path
While The New York Times Company (NYSE:NYT) has pared itself down to its core newspaper business, Gannett Co., Inc. (NYSE:GCI) has been looking to pivot to a more modern medium—television. The company has experience in the space, so the move makes complete sense.
The big transaction was its recently announced $1.5 billion deal to buy Belo Corp (NYSE:BLC), bringing twenty new television stations into the fold. If the transaction is consummated, it will nearly double Gannett Co., Inc. (NYSE:GCI)’s station count. More importantly, it will diminish the company’s reliance on newspapers.
When a company makes a big acquisition, its shares normally fall. That didn’t happen this time, as Gannett Co., Inc. (NYSE:GCI)’s shares jumped 34% on the news. Clearly the market likes the television pivot. The all-cash deal means that Belo Corp (NYSE:BLC) shareholders should probably lock in gains now. There’s little reason to stick around and risk the deal falling apart.
Out of the ashes
The Tribune Company, which only recently exited from bankruptcy, is following both The Times and Gannett Co., Inc. (NYSE:GCI)’s leads. The company has announced that it is shopping its newspapers so it can focus on more modern media formats. And, now, it has announced a $2.7 billion deal to buy 19 television stations from a private equity firm.
This move will bring the company’s station count to 42. This pair of corporate actions clearly shows that a revitalized Tribune is going to push hard to get its ship heading in the right direction. Like Gannett Co., Inc. (NYSE:GCI), it has plenty of television experience, so the purchase makes strategic sense.