Experts: Sit tight with Gannett, Tegna stock

Now that the company has split into two parts, what should you do with your Gannett (and Tegna) stock?

For now, experts say, probably nothing.

"If the first quarterly report that the new Gannett puts out is absolutely abysmal, I might not wait for a second, but I'm not expecting to see that," said George Conboy, chairman of Brighton Securities.

"I would probably also advise looking at how they execute for a little bit as two entities and see if they're on track or not," said Stefan Kip Astheimer, vice president and chief strategist for Howe & Rusling investment advisers.

Gannett, which owns the Democrat and Chronicle Media Group, USA TODAY, 90 other daily newspapers, Cars.com and many TV stations, has been divided into two separate companies. The new company that includes the broadcast properties will be called Tegna, while the company with the newspapers will be the new Gannett Co. Inc.

"Over the last few years, a lot of the large media conglomerates have split off their publishing and broadcast and digital arms into separate companies," said Astheimer.

After the split, Gannett stockholders will keep their shares of Gannett (now Tegna) stock and also get one share of the new Gannett stock for every two Tegna shares.

For example, if you owned 100 shares of the old Gannett stock, you will get 100 shares of Tegna and 50 shares of the new Gannett. The new shares will be valued to equal what you had before. Fractional shares will be paid in cash, Conboy said.

The combined value of the new stock shares will be roughly equal the value of the old Gannett stock you owned, Conboy said.

Annual dividends will increase after the split from the current 8 cents per share to 8.8 cents, Conboy said.

"The total that a shareholder will get if they buy no more shares, if they sell no shares, if they just sit tight, they will get 10 percent more in cash dividends over the coming 12 months than they got over the last 12 months," Conboy said.

After the split, the dividends will continue, but they will be paid by the two companies — approximately 5.6 cents per share from Tegna and 3.2 cents from the new Gannett.

Despite the widespread opinion that newspapers are a dying industry, Conboy believes there are many reasons to feel confident about the new Gannett stock.

Gannett has successfully implemented pay walls for newspaper websites and layoffs over the past few years have improved the bottom line financially.

But the most significant factor in the viability of the new Gannett may be the fact that the new company will be debt-free because Tegna is taking on the debt of the old Gannett. Plus, the new Gannett will start out with a $500 million line of credit.

That financing tool is expected to be used to buy additional newspapers to add to the chain. The new Gannett also could be ripe for acquisition because it has no debt and has already been reorganized and is profitable, Conboy said.

But that's not the primary reason for the split, Conboy said.

"I really think they're doing it because senior management believes the sum of the parts will be worth more than the whole, even if the newspaper part doesn't decline and just stays even," he said.

Astheimer agreed.

"They're doing this to create two viable companies. They're not trying to load one up as a pit of despair and push it out. They're trying to create an entity which will hopefully be viable and sort of to unlock additional value rather than to get it off of their books," Astheimer said.

BLOUDON@DemocratandChronicle.com