Gannet Boosts Digital Portfolio with Cars.com Acquisition

Gannett Co., Inc. (GCI) has moved one step ahead in enhancing its digital portfolio by completing the buyout of the remaining 73% stake in Cars.com for about $1.8 billion. This diversified media conglomerate earlier had a 27% interest in this auto-sales website. Cars.com will become part of Gannett’s Broadcasting & Digital business, which the company plans to separate from its Publishing unit.

Cars.com gives online visitors price checks, model comparison and dealer reviews. Launched in 1998, Cars.com was previously owned by Classified Ventures, a consortium of five companies. Apart from Gannett, other companies forming the joint venture are Tribune Media Co., The McClatchy Company (MNI), A. H. Belo Corporation (AHC) and Graham Holdings (GHC).

Witnessing about 30 million online viewers every month, Cars.com has been able to increase its revenue at a compound annual growth rate (CAGR) of approximately 20%, while growing EBITDA at a CAGR of almost 40% over a period between 2006 and 2013. It also generated pro forma revenue of approximately $535 million in 2014.

For quite some time now, Gannett has been making endeavors to expand its presence in broadcasting and digital products with a view to lower its dependency on its soft print media business and traditional advertising thereby lowering its susceptibility to economic conditions.

The recent news of Gannett taking over Cars.com underscores the same. Prior to this, the company bought six television stations of London Broadcasting Company and also acquired television-station operator, Belo Corp. We believe this will transform Gannett’s business model, which was largely focused on low margin newspapers to a high-margin multi-media business.

Apart from business model diversification initiatives to add revenue streams and counter any economic onslaught, Gannett is adapting to the evolving multi-platform media universe, which currently includes Internet, mobile, social media networks and outdoor video advertising. The company is also realigning its cost structure and streamlining operations to increase efficiencies.

Gannett currently holds a Zacks Rank #3 (Hold).

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