Alexa Davis | Forbes Staff | August 5, 2014

Gannett GCI  Tuesday became the latest media company to separate its publishing assets, which include USA Today, from broadcast and digital businesses. The move is the latest in a string of similar actions by the likes of  Time Warner TWX and News Corp NWSA., which have both separated slow-growing print segments from more profitable television divisions.

In another transaction, Gannett confirmed it will acquire full ownership of Cars.com through a $1.8 billion purchase of the remaining 73% interest it does not already own in Classified Ventures LLC. The online car shopping site, which attracts 30 million visits per month, will further Gannett’s digital reach and provide another avenue for advertising revenue.

Tuesday’s announcements come as Gannett continues to reposition its business with a focus on broadcasting. The company recently completed a $2.2 billion acquisition of Belo, which doubled the company’s broadcast portfolio and made it the largest independent station group of major network affiliates in the top 25 markets. Now reaching one-third of all American television households with 46 television stations, Gannett is primed to continue the growth of its flourishing broadcast business.

“The bold actions we are announcing today 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,” said Gracia Martore, CEO of Gannett.

Martore will remain atop the new, yet-to-be-named broadcasting and digital company, which will assume all of Gannett’s existing debt and leave the newly independent print company with minimal baggage. Management has also assured shareholders the split will not dilute the value of Gannett’s current 20-cent quarterly cash dividend.

The separation satisfies the cravings of investors who have expressed more interest in broadcast assets than in traditional newspapers, which have  struggled with declining advertising revenues. As smaller and more palatable pieces to digest, the two companies will be better positioned to serve a natural shareholder base.

While the combined company may have been wary to pour capital into print operations that produced less upside for shareholders, the publishing business will now have greater cash flow to serve its interests. After receiving print asset stock options, new management will also be incentivized to maximize returns without the safety net of broadcast profits.

Joe Cornell, publisher of Spin-Off Research, said the divorce between Gannett’s two core businesses will spur greater investment in both arms and could lead to a merger or acquisition a year from now.

“There is a lot of buyout activity post separation in spin-offs. In fact, being purchased is four to five times more likely than for a typical S&P 500 company. I wouldn’t be surprised if publishing assets were picked off at some point down the road,” he said.

News of the breakup plan gave Gannett shares a modest 0.5% lift Tuesday morning, adding to year-to-date gains that have the stock up 16.6% in 2014. If recent history is any indication there may be more upside ahead as spinoffs and their former corporate parents have performed well in recent years. The Guggenheim Spin-Off ETF is up 175.9% over the last five years, compared with a 91.9% gain for the S&P 500.

Gannett’s announcement comes in what has been a banner year for spinoffs with 28 completed deals in the first six months, up from 18 in the prior year. Cornell says this momentum is likely to continue and expects 57 deals to be complete by the year’s end. (See: Record Year In Reach For Spinoffs Thanks to Activist Appetite, Sluggish Growth)

Advising on Gannett’s corporate breakup are Greenhill & Company and the law firm Wachtell, Lipton, Rosen & Katz. Greenhill and Citigroup C, and legal advisor Nixon Peabody, are advising on the purchase of Cars.com

 

View Article on forbes.com: After Breakup, Gannett's Print and Broadcast Assets May Be Ripe For The Picking

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Spin-Off Research is published by Spin-Off Advisors, LLC. Spin-Off Research is a subscription-based service for Professional and Institutional Investors.  Blog entries are delayed.  Spin-Off Research subscriber-base receive the spinoff report at time of press via Email Bulletins.  To learn more about becoming a subscriber, please contact us. Spin-Off Advisors, LLC provides coverage on all US and major Global spinoffs, carve-outs and split-offs; Spin-Off Research published since March 1997.

 

 

 

Sinclair Broadcast and Nextstar Broadcasting may be better bets. Intel's shares could rise to $40 in a year. And bondholders face off against Caesars Entertainment in an epic battle.

Alexander Eule | Barron's | August 9, 2014

Just two months ago, we said that shares of Gannett were being underappreciated by investors. Long term, we said the stock, then $28, could be worth $40 ("Gannett's Shares Could Rise 40%,"), adding that it could get a short-term pop by splitting the company into separately traded broadcast and publishing segments. In that scenario, we thought the stock could quickly gain 20%.

Gannett (ticker: GCI) went for the short-term gains. Last Tuesday, the company announced a spinoff, a move investors seemed to have recently anticipated. The stock finished the day at $34, right at our short-term target price and hovered there the rest of the week.

John Rogers, chairman and CEO of Ariel Investments and a long-time holder of Gannett, is still bullish. He now thinks the combined stock could be worth $45 in 18 to 24 months, a better than 30% increase.

Much of the excitement about Gannett is tied to the company's broadcast business, which benefits from strong political advertising and growing license fees from cable and satellite operators. But even newspapers seem to be stabilizing, as Gannett hones its local strategies.

Last week, Gannett also announced that it was paying $1.8 billion for the 73% of Cars.com it doesn't already own. The Website was created in 1998 by a consortium of newspaper companies trying to make up for lost classified ads. For the print publishing world, it has been a rare Internet success. The site lists some 4.3 million new and used cars on behalf of 20,000 dealers. Gannett says revenue has grown at a 20% annual rate since 2006, totaling $538 million this year.

Gannett plans to put Cars.com with the as-yet-unnamed broadcast group—not exactly a ringing endorsement for Gannett's now lonely newspaper business. "They're trying to distance the red-headed stepchild from the good kids," says Joe Cornell, who runs Spin-Off Advisors.

The spinoff will trump any strategic news, at least until the separation is complete, sometime in 2015. Cornell, who has closely followed the recent wave of media spinoffs, says Gannett's separation is already reflected in the stock price. "I would guess that it is probably going to tread water for a while," he says.

Investors should consider cashing out and buying a pure-play local broadcaster like Sinclair Broadcast Group (SBGI) or Nexstar Broadcasting Group (NXST), which are benefiting from the same local-TV trends as Gannett.

View the article on barrons.com: After Pop on Spinoff, Gannett May Tread Water

 

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Spin-Off Research is published by Spin-Off Advisors, LLC. Spin-Off Research is a subscription-based service for Professional and Institutional Investors.  Blog entries are delayed.  Spin-Off Research subscriber-base receive the spinoff report at time of press via Email Bulletins.  To learn more about becoming a subscriber, please contact us. Spin-Off Advisors, LLC provides coverage on all US and major Global spinoffs, carve-outs and split-offs; Spin-Off Research published since March 1997.

 

 

A day after Tribune Media Co. spun off the business, Tribune Publishing shares edged lower.

By Lynne Marek August 05, 2014

Tribune Publishing Co.'s shares started trading today on the New York Stock Exchange, making clear the market's reaction to the newspaper company stock: lukewarm.

A day after Tribune Media Co. spun off the business, Tribune Publishing closed today at $21.15 a share. That's down from the stock's July 24 unofficial "when issued" launch price of $25.50. Yesterday, the shares closed at $22.12.

Tribune Publishing — which owns the Chicago Tribune, Los Angeles Times and Baltimore Sun — is gaining its independence at a challenging time for newspaper companies. Advertising and subscription income have been sliding for years in the face of rising competition from digital alternatives. While the big brand names have offered their own digital products and cut costs, including jobs, their profits have been squeezed across the industry.

Today's stock prices value Tribune Publishing at $507.7 million, and its former Tribune Media parent at $8.35 billion.

Meanwhile, Tribune Media kept the broadcast business.

“Today marks a new chapter in our company's storied history. By establishing ourselves as an independent company, we are unlocking the full value of Tribune Publishing and its extensive assets,” Tribune Publishing CEO Jack Griffin said in a statement. “While print will always remain at our core, we are focused on developing engaging experiences across every conceivable platform — from print and online to smartphones and tablets.”

PROFIT AND GROWTH

Both the Tribune print and broadcast businesses are profitable, but revenue for the broadcast business, including some 42 local TV stations and the evolving WGN America cable channel, has been growing since the Chicago-based media company emerged last year from four years of bankruptcy.

It would be easy to blame Tribune Publishing's stock moves on the industry's dreary prospects, but it's more complicated than that. The overall market has had a rough run in the past few days, with the Standard & Poor's 500 index down 2 percent since July 30.

The stock's performance today "seems reasonable given the business and current, soft stock market conditions,” said Rich Hummel, director of research at Tribune shareholder Kirr Marbach & Co. LLC, which is based in Columbus, Indiana. “I think the stock will remain within a trading range of $20 to $26 until more information comes out of the company.”

It's also fairly typical for shares of a spun-off business to decline in the first few days of trading, said Keeley Asset Management Corp. portfolio manager Edwin Ciskowski. His Chicago-based firm owns 250,000 shares of Tribune Media and about 62,000 of Tribune Publishing as a result of the spinoff.

Stakeholders in a parent company typically decide to stick with the core business — which they often better understand — and cash out of the side business. That pushes down the value of the spinoff's shares, he said. Still, it's clear to shareholders and analysts that Tribune Publishing management has a challenge ahead, they said.

THE FAVORED HALF

“Broadcast is viewed as the favorable business,” said Mr. Ciskowski. He declined to say whether he's planning to buy or sell Tribune Publishing shares.

The newspaper company has at least “stabilized” its circulation when digital subscriptions are taken into account, Mr. Ciskowski said. In addition, there are growth opportunities in the company's digital products, as well as in its printing services sold to other newspapers, such as USA Today, he said.

Mr. Ciskowski also likes Tribune Publishing's plan to buy up smaller newspaper outlets around its major markets to increase its appeal to advertisers, he said.

Still, Tribune Publishing has been stripped of some of its more valuable assets, including the Michigan Avenue landmark Tribune Tower and other facilities, while being saddled with $350 million in additional debt and new expenses, such as paying rent.

Meanwhile, shares of the broadcast company, Tribune Media, which trade on an over-the-counter or "pink sheet" basis, closed today at a 52-week high of $87.20. It was benefiting from news today of the $1.8 billion Gannett Co. purchase of the Classified Ventures LLC business Cars.com, which was partly owned by Tribune. That digital interest was one more lucrative business that Tribune Media kept for itself.

CARS SHARING

For its part, Tribune Publishing expects to enter a new five-year agreement with Cars.com that will allow it to offer Cars.com products exclusively in its eight newspaper markets.

Corporate spinoffs separating print and broadcast assets have been happening across the industry. In the latest move, Gannett announced today that it will do the same, keeping its broadcast and digital businesses together and spinning off a debt-free publishing company.

With analysts predicting acquisitions among the newly spun-off print media companies, Tribune Publishing may look like a bargain now. At its current market capitalization, Tribune Publishing is significantly discounted from some earlier valuations.

A year ago, when the newspaper group was on the sales block, there was speculation that it could fetch as much as $1 billion, though in 2012 it was valued at $623 million by Tribune consultant Lazard Ltd. The lower market cap today could revive interest among potential bidders, such as Rupert Murdoch's News Corp., which has $3.2 billion in cash following its split last year with Twenty-First Century Fox Inc.

At least one analyst sees Tribune Publishing as an attractive buy.

“Tribune Publishing offers the better opportunity (versus owning the Tribune Media) at the current stock price,” said Joe Cornell, who is publisher of Chicago-based Spin-Off Advisors LLC. “Tribune Publishing is trading at a 56% discount to our fair value of $33.75. I think investors who buy around $20 will be happy a year from now.”

Trading in Tribune Publishing shares today was about average for the period since its unofficial trading began on July 24. The stock's heaviest trading was on that first day, when the stock was highest.

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Spin-Off Research is published by Spin-Off Advisors, LLC. Spin-Off Research is a subscription-based service for Professional and Institutional Investors.  Blog entries are delayed.  Spin-Off Research subscriber-base receive the spinoff report at time of press via Email Bulletins.  To learn more about becoming a subscriber, please contact us. Spin-Off Advisors, LLC provides coverage on all US and major Global spinoffs, carve-outs and split-offs; Spin-Off Research published since March 1997.

By Vito J. Racanelli | The Trader | 7/19/2014

Below is an excerpt from the Barron's article "U.S. Earnings Carry Dow Past 17,000":

Spin Cycle

Spin-offs are hot. Perhaps too hot.

When Wall Street and Corporate America get together to push an idea like nobody's business, it's time to watch out. Over the past two years, this column has reported on the growth in spin-offs and on several situations that offered potential stock value. While attractive ones remain, now that it's raining spin-offs, it's time to point out potentially overvalued spins.

There were 28 spin-offs completed in the first half of 2014, up from 18 in the same period of 2013, according to Joe Cornell, head of Spin-Off Advisors and a veteran of the field. He projects that the second half will be equally robust, and that with 57 spin-offs in 2014, activity will be up sharply from 37 in 2013. That would mean 2014 could boast the most spin-offs completed "since 2000, when 66 spin-offs were unleashed." Let's leave aside speculation about what, if anything, that suggests about the broad market.

The pace of spin-off announcements has been accelerating worldwide in the past few months, says William Mitchell, publisher of spinoffprofiles.com, due partially to a fear that interest rates will rise soon. That worries chief finance officers and incentivizes companies already considering a spin-off to do one sooner rather than later. In a spin-off, the parent company often has to issue bonds to reapportion debt across the parent and the spun-off firm, and sometimes to fund one-time dividends from the spin-off to the parent.

While studies show that spin-offs typically result in appreciably higher stock prices for both companies, "the variance in outcomes" is likely to be much wider now, Mitchell avers, as companies rush to get the spins done. Analysts will have less time to study situations and mispricing will be more likely, he says.

Mitchell has put together a list of recent spin-offs that appear overvalued: Vertiv (VRTV), TimkenSteel (TMST), Seventy Seven Energy (SSE), and Viper Energy Partners (VNOM).

Vertiv is a paper and packing distribution company created from a merger between Unisource Worldwide, owned by private-equity company Bain Capital, and Xpedx, which was spun out from International Paper (IP) earlier this month. The resulting company, with a $608 million market cap, has seen pro forma sales and earnings decline for three years. It has 2% operating profit margins, and was saddled with about $800 million in debt, partly for a one-time dividend to IP. "There's only so much room for maneuver there if revenue continues to fall," Mitchell says.

 

 

 

View Article on barrons.com: U.S. Earnings Carry Dow Past 17,000

 

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Spin-Off Research is published by Spin-Off Advisors, LLC. Spin-Off Research is a subscription-based service for Professional and Institutional Investors.  Blog entries are delayed.  Spin-Off Research subscriber-base receive the spinoff report at time of press via Email Bulletins.  To learn more about becoming a subscriber, please contact us. Spin-Off Advisors, LLC provides coverage on all US and major Global spinoffs, carve-outs and split-offs; Spin-Off Research published since March 1997.

By Oliver Renick and Jacob Barach | Bloomberg News | August 11, 2014

Veritiv Corp. rallied the most on record after Seth Klarman’s Baupost Group LLC disclosed a 14 percent stake in the paper and packaging distributor.

The stock jumped 13 percent to a record $44.52 as of 3:06 p.m. in New York, the biggest advance since it started trading in June. The Norcross, Georgia-based company was created this year after International Paper Co. agreed to merge its Xpedx distribution business with closely held Unisource Worldwide Inc. and spin off the new company.

“Baupost has taken a large position in the stock and people probably view that as a good sign,” Joe Cornell, an analyst for Spin-Off Advisors LLC, said in a phone interview. The Chicago-based firm raised its rating on Veritiv to neutral, the equivalent of hold, from sell on July 7.

A call to Veritiv’s offices was not returned. Diana Desocio, director of communications at Baupost, declined to comment.

Klarman, whose firm managed $27 billion at the start of this year, is a bargain hunter who wrote the preface to the sixth edition of “Security Analysis,” a landmark 1934 book by Benjamin Graham on value investing.

Baupost, based in Boston, owns 2.25 million shares of Veritiv, according to a regulatory filing. Bain Capital LLC owned 49 percent of Veritiv, or 7.84 million shares, as of a July 1.

Xpedx and Unisource had combined income from continuing operations of $239.9 million in the nine months ended September 2013 and sales of $7.2 billion, according to a filing from February.

Veritiv shares fell to a low of $32.50 on July 3, one day after the stock started regular trading. It rebounded to $40.29 by July 29.

“It’s not surprising in the sense that spinoffs attract value investors,” Todd Wenning, an analyst at Morningstar Inc. who covers International Paper, said in a phone interview.

Veritiv will need to demonstrate if it can generate sustainable economic profit, or returns after subtracting a company’s cost of capital, Wenning said.

 

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Spin-Off Research is published by Spin-Off Advisors, LLC. Spin-Off Research is a subscription-based service for Professional and Institutional Investors.  Blog entries are delayed.  Spin-Off Research subscriber-base receive the spinoff report at time of press via Email Bulletins.  To learn more about becoming a subscriber, please contact us. Spin-Off Advisors, LLC provides coverage on all US and major Global spinoffs, carve-outs and split-offs; Spin-Off Research published since March 1997.

 

Matthew Smith | Smart Investor | August 27, 2014

Key takeaway: Disgruntled BHP investors should stress less: investors in spinoff stocks are historically rewarded in the end.

A lot of ink has already been spilled ­analysing BHP Billiton’s plans to spin off its aluminium, manganese, nickel and silver assets, as well as some coal, into a new company.

But before delving into the nitty-gritty of the valuation and growth prospects of the proposed NewCo, investors should give some consideration to the historical performance of spinoff companies across the board.

More from Smart Investor:

• What should you do with your shares in BHP and NewCo?

• Crawford to lead BHP spin-off

• Six stocks to future proof your portfolio

There’s a large enough sample size during the past two decades of ASX trading to see how spinoff companies trade.

Since 1995, no fewer than 30 demergers and subsequent listings have taken place like that BHP plans, should it be successful with its shareholder vote, expected in mid-2015.

Recent spinoffs include the demerger of Amcor’s Australasia packaging distribution business to create Orora Limited, Woolworths’ property spinoff to create SCA Property Group, Brambles’ demerger of its ­information management business to create Recall Holdings and, most recently, Westfield Retail Trust’s merger with Westfield Group’s Australian and New Zealand business to form Scentre Group.

BHP has itself twice performed similar spinoffs: in 2000 when it demerged half its steel business into a new ­company that became One Steel (subsequently renamed Arrium), and then in 2002 with the spinoff of BHP Steel (later renamed BlueScope).

Based on an analysis of ASX-traded spinoffs, the “child entity” tends to trade below its listing price during the first six months and then soars above the initial public offering price within the first year, according to Macquarie ­Equities Research.

How far above does it soar? The median share price of a spinoff company in Australia tends to trade around a 10 per cent premium to its float price within its first 12 months, research on 26 demergers shows.

But that’s not before shareholders’ confidence in the new entity is tested, with an initial period of underperformance of some 9 per cent on average within the first couple of months of trading, according to Macquarie.

Superior performance well documented

The phenomenon of the initially sinking and then outperforming spinoff company is well documented, not just in Australia but in larger markets such as the United States, where spinoffs are more common.

Research by investment firm JPMorgan, along with a Pennsylvania State University study, is often cited in the US based on thousands of case studies to form the basis for the investment case that spinoff companies produce a 10 per cent premium on average to market returns in the first 18 months.

An entire investment industry in the US has grown out of the thesis that spinoff companies hold a natural premium over the market, which has spawned specialist research firms and even a specialist fund that invests solely in spinoff companies and is managed by global firm Guggenheim Investments.

The natural premium spinoff ­companies enjoy has to do with the potential value assets can find when extracted from a larger portfolio, says Mike Sum, an M&A consulting partner with PwC.

“There may be hidden gems in the portfolio that won’t reach their potential under the parent because they couldn’t get management attention or they may be overlooked by the market,” he says.

“If you set them free, they become more nimble, more focused and ultimately they can get revalued.”

But while the so-called spinoff company premium takes a while to kick in, many investors sell out too quickly to reap the benefits.

The reason shares in spinoff companies tend to trade below their IPO price initially has to do with the “unknown quantity” that leads to some investors selling their shares in the early days, Sum says.

It’s natural for investors to be ­cautious about owning a new entity, particularly one in which management tends to have been plucked from ­management ranks within the senior company.

BHP has announced NewCo will be led by BHP’s current chief financial officer Graham Kerr. The parent company’s current head of investor relations, Brendan ­Harris, will step up as NewCo’s chief financial officer and BHP board member David Crawford will be appointed chairman.

Investors may also be compelled to sell their shares because they may not have an affinity with the new spinoff company, as it’s unlikely they have chosen to buy those shares, Sum explains.

Spinoff company shares will be ­allocated to investors in the parent company usually through an in specie distribution. In the case of BHP, shareholders will automatically receive shares in the demerged vehicle proportionate to their existing shareholding.

Freedom to spread wings

A successful spinoff will be one in a growing industry with a management team that can make the most of its opportunities, particularly in its early years as a listed entity, Sum says.

He points to Dulux as an example of a company that has successfully grown shareholder value since its breakaway from Orica in mid-2010.

In particular he points to Dulux’s hostile acquisition of building products supplier Alesco as an example of a management team determined to make the most of its split from the larger and less agile parent company.

Not all spinoffs follow the same ­­script and there have in the past been many examples of those unable to use their advantages to deliver shareholder value.

Since listing in mid-2011, shares in Echo Entertainment have disappointed, trading down and sideways to now be valued well below where they were priced following the demerger from Tabcorp.

Leadership uncertainty changes combined with Echo’s inability to maintain its exclusive casino licence in Sydney and the successful lobby of rival Crown for the Barangaroo site resulted in Echo losing its spinoff company advantage, according to Morningstar analyst Brian Han.

While it’s impossible for investors to know which spinoff companies are destined to be successful and which ones are likely to fail, Macquarie reckons those with high trading volumes and positive returns on day one end up performing better over the long term than those with lower volumes and disappointing volumes out of the blocks.

“Child entities” with greater than 5 per cent turnover typically outperformed those with lower trading volumes both long and short term, according to the Macquarie analysis.

Fifty-five per cent of the spinoff companies experienced positive returns on day one and those companies tended to outperform spinoffs with negative day-one returns.

Finally, 40 per cent end up being acquired within their first two years of trading, Sum points out, meaning many ­investors who sell their shares early end up missing out on a buyout premium.

Sum says that while there are risks associated with holding shares in ­spinoff companies, often due to untested management teams and uncertain distribution of costs within the new structure, overall the research consistently indicates the spinoff ­companies tend to create value in the medium term.

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Spin-Off Research, Independent Research for Institutional Investors

BHP Billiton to Spin-Off Assets into New Global Metals & Mining Company - Available to download

To download a copy of Spin-Off Research valuation on BPH click here

 

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Spin-Off Research is published by Spin-Off Advisors, LLC. Spin-Off Research is a subscription-based service for Professional and Institutional Investors.  Blog entries are delayed.  Spin-Off Research subscriber-base receive the spinoff report at time of press via Email Bulletins.  To learn more about becoming a subscriber, please contact us. Spin-Off Advisors, LLC provides coverage on all US and major Global spinoffs, carve-outs and split-offs; Spin-Off Research published since March 1997.

By Gabrielle Karol | FOXBusiness | Published August 4, 2014

 

Following in the wake of companies like Time Warner and News Corp., the Tribune Company is officially spinning off its newspaper business on Monday.

The new company, Tribune Publishing, will begin trading on the NYSE on Tuesday under the ticker symbol TPUB, and includes newspapers such as The Los Angeles Times, Chicago Tribune, Sun Sentinel and The Hartford Courant.

“Three is a trend, and this is now solidly a trend,” said Rebecca Lieb, an analyst with the Altimeter Group, referring to the Time Warner (TWX) and News Corp. (NWSA) spinoffs. Also joining the pack are Journal Communications Inc. and E.W. Scripps Co., which announced last week that they would be combining their broadcasting businesses and spinning off their newspapers into a separate public company.

The splits allow media companies to jettison struggling newspapers and focus solely on the more-profitable broadcasting business.

“The lagging revenue of print divisions are bringing down revenue of overall media companies, and are therefore reflecting on their stock price,” said Lieb.

But the spinoffs don’t necessarily mean that newspapers are being left to die a slow and quiet death. Some analysts, including Lieb, say the splits could actually save the publishing industry, by allowing for a greater focus on the specific problems facing print journalism.

“When a print division is the only division that senior management needs to worry about and there aren’t bigger, more profitable distractions, more attention can be paid to solving these not at all easy to solve problems,” explained Lieb.

The biggest problem, of course, is the decline in newspaper advertising, which has hit even the nation’s top papers. The New York Times Co., (NYT) for instance, reported last week that its Q2 advertising revenue dropped 4.1% versus the previous year. Earlier this year, the Newspaper Association of America (NAA)published a report saying that traditional print advertising fell 8.6% in 2013 to $17.3 billion.

The decline in advertising has put pressure on newspaper companies to increase circulation prices and create new revenue opportunities on the digital side.

“If you go back to 2007 and look at the newspaper revenue pie, about 80% of revenue came from advertising and 16% came from circulation and 3% was other,” said NAA VP of Research and Industry Analysis Jim Conaghan. “Last year, 46% of revenue came from advertising in printed papers and 29% came from circulation, and other portions grew to 8%.”

With that said, newspaper industry analyst Ed Atorino of the Benchmark Company isn’t overly optimistic.

“There’s always hope for periods of success here and there … but it’s hard to fight the tide, and newspaper advertising has not increased for a long time,” said Atorino.

TPUB’s Prospects

Despite this, Atorino said Tribune Publishing chief executive Jack Griffin is certainly up for the challenge of tackling his company’s major issues. Griffin has had a long career in both magazines and newspaper, though his management style was publicly criticized by Time Warner CEO Jeff Bewkes while he was at Time Inc. Griffin was eventually fired from his position as Time Inc. CEO.

“I know Jack well, and he’s an excellent executive who’s moved up the [ladder] to head Meredith Publishing Group. Now, he’s at a much bigger company doing newspapers, but he’s a talented guy who did well fighting the magazine battle, believe it or not,” said Atorino.

And in general, Spin-Off Research principal Joe Cornell, who does institutional research on spinoffs, said most spinoff companies do better once they’re on their own. Cornell points to the Bloomberg Spinoff Index, which has produced a return of 520.7% since its inception in December 2002, versus 119% for the S&P 500 in the same time frame.

“In the near term, the next three or four months, there may be a distribution in shares as investors make the decision whether to continue to own the publishing assets,” said Cornell, “so I don’t think [TPUB] will light the world on fire in the short term.”

With that said, Cornell is optimistic about the publishing business’s prospects in a year or two.
“They’ll go from being the redheaded stepchild begging for money and attention to now getting to run in their own best interests,” said Cornell.

View Article on foxbusiness.com: Will the Tribune Split Be a Success for the Newspaper Business?

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Spin-Off Research is published by Spin-Off Advisors, LLC. Spin-Off Research is a subscription-based service for Professional and Institutional Investors.  Blog entries are delayed.  Spin-Off Research subscriber-base receive the spinoff report at time of press via Email Bulletins.  To learn more about becoming a subscriber, please contact us. Spin-Off Advisors, LLC provides coverage on all US and major Global spinoffs, carve-outs and split-offs; Spin-Off Research published since March 1997.