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Gannett in Focus after TEGNA Spin-off: What's in Store? - Analyst Blog

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Gannett Co., Inc. GCI, a diversified publishing conglomerate, which retained the name of the parent company, started trading as a separate entity upon completion of its spin-off on Jun 29. It is being headed by Chief Executive Officer, Robert Dickey. Management declared the name of the Broadcasting and Digital Company as “TEGNA”, and it commenced trading under the ticker symbol, “TGNA”.

A significant presence in digital and print publications, coupled with the flagship brand, USA TODAY, and Newsquest, the UK publishing unit, positions Gannett well to undertake significant efforts to establish itself as the next-generation media mogul. Management had earlier informed that Gannett will be financially sound enough to take innovative steps and make strategic buyouts. Management further asserted that a virtually debt-free balance sheet would assist the new company in undertaking shareholder-friendly moves.

As stated earlier, the new Gannett is expected to initiate a share repurchase program worth $150 million, to be executed over a three-year time frame. It is also likely to pay an annual dividend of 64 cents a share. Moreover, the company is anticipated to enter into a revolving credit facility agreement amounting to $500 million for greater financial flexibility.

On the other hand, TEGNA TGNA, which carries a Zacks Rank #3 (Hold), is expected to initiate a share buyback program of $750 million, to be executed over a three-year time period. Also, it is likely to pay an annual dividend of 56 cents a share.

Management had previously highlighted that within the next three years, TEGNA expects to attain compound annual revenue growth of 7%–9%, and EBITDA margins between 32% and 37%. TEGNA’s Media segment is projected to achieve compound annual revenue growth of 6%–8%, and EBITDA margins in the band of 43%–50%. The company’s Digital segment is anticipated to attain compound annual revenue growth of 10%–11%, and EBITDA margins between 28% and 31% from 2016 through 2018.

We believe that the decision to separate Publishing will help to better harness the potential of the Broadcasting and Digital businesses. Moreover, once the companies are spun off, these will have separate management teams and a much more defined capital structure that will provide ample room to take strategic decisions related to any investment, acquisitions or new endeavors beneficial for the particular business, and in no way affect the other entity.

Earlier, Tribune Company had separated 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 their sluggish print business.

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