Thursday, October 8, 2015

Journal Media Group: Sold to Gannett

Two of the (very) recent publishing spinoffs are going to continue the industry's consolidation trend; Gannett (GCI) announced last night the purchase of Journal Media Group (JMG) for $12/share in cash for nearly a 50% premium.  The purchase price values Journal Media at around ~6x my swag of EBITDA.  I previously mentioned that Journal Media made a natural acquisition target for Gannett before it was spun out of the Scripps/Journal Communications transaction back on April 1st.  Journal was setup for an acquisition with no debt, no controlling shareholder and papers that fit well into Gannett's portfolio of mid-sized city publications.  Sounds a lot like Cable ONE (CABO) which was recently spun out with the implied purpose of being acquired.

The timing of the transaction is somewhat surprising as spinoffs typically wait two years before being acquired to avoid IRS scrutiny around their tax free status.  But Journal Media has provided its former parent E.W. Scripps with an opinion reaffirming the tax free nature of the transaction.  Gannett looks a little bit cheap here, but along with New Media (NEWM) they'll be the consolidators in an industry that I don't want to hold through the next recession (whenever that might be) as advertisers move toward other platforms.  The broadcast/newspaper spinoff trade has worked out well this year, but time to close it out, I sold my shares today and will let arbitragers get the last percentage points.

Disclosure: No positions


  1. Congratulations. I 'thumb-sucked' on JMG for past six months and kicked myself when saw the news. Any other potential targets out there in your radar?

    1. Ha, mostly luck but thanks. Working on another spinoff idea where one of the pieces is likely to be acquired, hope to have it done soon.