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Have you looked at Gannett?


Phoenix01
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I got turned on to this by seeing the huge loss FFH had taken on their initial position.  They appear to be a well run company caught in a difficult environment.  They appear to be doing what is needed to steer themselves out of trouble.

 

The market has slaughtered the price and it appears to be way over done.  For fun I looked at the ownership (nasdaq) and found that institutionals own 110% of the stock with another 30% of the stock sold short.

 

This appears to be an easy multi-bagger within the next few years.  Can someone please torpedo this idea?

 

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Guest kawikaho

If you think this is a great investment, I've got a couple more ideas for you in the U.S. automakers.  ;-) 

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They are probably generating more than $440 million in operating income in their digital and broadcasting businesses.  That's more than $1.28 per share in after tax operating profit. 

 

How you get rid of the $3.8 bln in debt is the trick. 

 

Publishing produced more than $900 million in operating profit over the entire year (almost $600 million in after tax operating profit).  How that changes this year?  Assuming publishing doesn't expire before 2012, there could be some value in the unsecured notes, trading at 60 for the 2012s and 67 for the 2011s.

 

If you assume publishing goes to zero and debt does not change by 2012, the enterprise value of the digital and broadcasting businesses might fetch $3 bln.  Take away the revolving credit facility, which will be about $2.5 bln and you have $500 million of value to be divided between the two unsecured notes (aggregate value of $1 bln) and the pension fund members ($891 million liability at year end 2008).

 

Worst case, maybe 25% on the notes, assuming noteholders and pension members are treated equally (-58% capital loss offset by whatever interest gets paid at 10.625% current yield until re-org. on the 2012s). 

 

Best case, debt gets whittled down by continued cash flow generation in the publishing assets, maybe $300 million a year over the next 3 years.  Debt ends up around $2.9 bln in 2012, all in the revolver (assuming they can increase their lines by approx. $200 million).  That suggests a 67% capital gain augmented by 10.625% current yield until April 2012 on the 2012s.

 

Assign your probabilities...

 

 

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Guest dealraker

Love the assumptions above about GCI and automakers and that is the very type of quick assumption that makes value available from time to time.  There is the debt and it is a serious issue.  Meanwhile the business sells for 1/2 one year's cash flow and most of the capital allocations are very put-offable.

 

In other words knocking it down to a level you can understand: The business is selling for one million and this year's cash flow is two million.

 

Bought at $2.  We'll see.

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In a declining industry they have managed their business in such a way that they have been able to pay out dividends and buy back stock.  Why?  They must have some sort of advantage.

 

The debt does not particularly scare me because they have the cashflow to support it.

 

In a down market the weak get killed and the strong take advantage.  Gannett already has a track record of being a survivor.  Will history tends to repeat itself?

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Guest longinvestor

Buffett talked about newspapers two years ago at the ASM. If I remember correctly, he tracks something like the ratio of # of people on caskets:# kids entering college (?) and that ratio continues to worsen. He is not buying, nor selling. He mentioned the joy in reading newspapers. Of course, he has done well with his $ invested here.

 

Can he look out 15 years from now and say newspapers will be around making money like they did in the past?

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Guest dealraker

There are a lot of businesses in this country that would turn out to be wonderful vehicles to get rich with if only the operators could think like Warren Buffett.

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Doesn't the exchange offer on the 2 Gannett bonds (5.75% June 2011s & 6.375% April 2012s), assuming a good deal of acceptance of the offer, make these money good (to borrow a term from my trader friends)?  Is it possible to keep the bonds, even if a majority of holders take the offer?  If so, does anyone know where I can get some and at what price?  The last price I was offered was 67 & 60, respectively (pre-exchange offer announcement).

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