News Corp (NWS), Gannett Co., Inc. (GCI): An Investment Opportunity in This Publishing Business Spinoff

Gannett Co., Inc. (NYSE:GCI) expansion into broadcasting business

Gannett Co., Inc. (NYSE:GCI), one of the biggest publishing companies, has a bit higher EBITDA multiple than the new News Corp. At $25.60 per share, Gannett is worth $5.86 billion on the market. The market values Gannett Co., Inc. (NYSE:GCI) at 6.16 times its trailing EBITDA. The company derives most of its business operations from two main segments: the declining publishing business (70% of revenue) and the fas- growing broadcasting business (17%). Many investors have speculated that Gannett would generate a lot of value for its shareholders by separating the two businesses.

Gannett Co., Inc. (NYSE:GCI) has recently expanded its footprint in its high-growth broadcasting business with the $2.2 billion acquisition of Belo. With this acquisition, Gannett Co., Inc. (NYSE:GCI) will double its broadcast assets, making it the fourth largest owner of major network affiliates with 30% national coverage. Moreover, Gannett expects to realize around $175 million in annual run-rate synergies in around three years after the deal is closed.

At $2.2 billion, the pro-forma EBITDA multiple is only 5.4, including the three-year run-rate estimated synergies. Investors might also be excited with its plan to buy back around $300 million worth of shares in the next two years, representing more than 5.1% buy back yield at its current trading price.

My Foolish take

Personally, I think all three of these businesses could fit well in the long-term portfolios of media and publishing investors. I like the new News Corp with its quite low EBITDA multiple (after adjusting cash and investments), its strong debt-free balance sheet and the ownership of great brands including the Wall Street Journal, Dow Jones, HarperCollins and Fox Sports Australia. 21^st Century Fox could also deliver a decent gain for long-term investors with its higher growth. Gannett Co., Inc. (NYSE:GCI), with the acquisition of Belo, could experience good business growth as well, driving up its share price in the near future.

The article An Investment Opportunity in This Publishing Business Spinoff originally appeared on Fool.com and is written by Anh Hoang.

Anh HOANG has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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