Diversified media conglomerate, Gannett Co., Inc. (GCI) made some strategic declarations to keep itself buoyed on the growth trajectory. These included the disclosure of $1.25 billion Senior Notes offering, shareholders’ approval of the Belo Corp. acquisition and initiation of a new pilot program. Moreover, the company signed a deal with Generation Partners to promote the growth of Captivate Network.
Gannett, which competes with The New York Times Company (NYT - Analyst Report), priced its Senior Notes due 2019 and Senior Notes due 2023. The face value of notes maturing in 2019 is $600 million at a coupon rate of 5.125%, which will be issued at 98.724% of the face value. Subject to some exceptions, the 2019 notes may not be redeemed by the company before Oct 15, 2016.
Similarly, face value of notes maturing in 2023 is $650 million at a coupon rate of 6.375%, which will be issued at 99.086% of the face value. The 2023 notes, also subject to certain exceptions, may not be redeemed by the company before Oct 15, 2018.
The net proceeds will be used to finance the Belo acquisition, which was today approved by Belo’s shareholders. The remaining proceeds would be used for other business purposes.
The Belo acquisition was announced in June. The $1.5 million deal is expected to close by the end of 2013. This deal is a strategic fit for the company, as it will transform Gannett’s business model that is largely focused on low margins newspapers into a high-margin multi-media business.
The company has set up a subscription-based model, launched Digital Marketing Services in top markets and refurbished its iconic brand, USA TODAY to generate new advertising and marketing revenue sources. The company is expanding its digital marketing services under the brand name of G/O Digital.
In October, Gannett will launch its all-access content subscription model in fourmarkets in association with USA TODAY. The program will be initiated in Indianapolis, Ind., Rochester, N.Y., Appleton, Wis., and Fort Myers, Fla.
For the pilot program and expansion of digital services, Gannett is expected to invest nearly $2-$3 million in third-quarter 2013 and nearly $4-$5 million in fourth-quarter 2013.
Further, Gannett announced the signing of a partnership with private equity firm, Generation Partners to promote growth of its digital media subsidiary – Captivate Network. Captivate Network is likely to be established as a separate company with Gannett and Generation Partners as co-owners. The association with Generation Partners is likely to bring enough capital and would facilitate in the strategic expansion of Captivate Network’s operations.
We expect all these measures to enhance Gannett’s operations and bolster its performance.
Currently, Gannett caries a Zacks Rank #2 (Buy). Other stocks in the publishing periodicals sector include Martha Stewart Living Omnimedia Inc. and The Dolan Company (DM - Snapshot Report). Dolan Company carries a Zacks Rank #1 (Strong Buy) while Martha Stewart carries a Zacks Rank#2.