The McClatchy Co., owner of The Kansas City Star, has agreed to sell its stake in Cars.com as part of a reorganization by co-owner Gannett Co.
Cars.com, an online car shopping site, is the chief property of Classified Ventures LLC, which is jointly owned by five media companies.
Gannett is buying out the interests of the four other companies and spinning off its publishing business as a separate company that will keep the Gannett name. Its broadcasting and digital businesses will take an as yet undetermined new name.
Gannett is paying $1.8 billion for the 73 percent of Cars.com it doesn’t already own.
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McClatchy will receive $640 million for its 25.6 percent ownership of Cars.com in the sale, which is expected to be completed this year. The other selling owners are Tribune Media Co., Graham Holdings Co. and A.H. Belo Corp.
The sale will net McClatchy $406 million after taxes, which it will use partly to pay down debt and to finance additional digital investments.
“Cars.com only addresses a fairly limited segment of our overall business,” McClatchy chief executive and president Pat Talamantes said in an interview with McClatchy’s Washington bureau. “We think that by selling the asset that we’re able to benefit our entire portfolio of advertising business and not just the automotive segment.”
The site reaches 10 million unique users a month, second to the 14 million at AutoTrader.com, and lists 4.3 million vehicles from 20,000 dealers. Cox Enterprises had paid $1.8 billion for a 25 percent stake in AutoTrader.com seven months ago.
Each of the former owners will receive a five-year affiliate agreement with Cars.com allowing them to continue selling Cars.com products and services exclusively in their local markets.
“There has been enough change amongst the ownership group, and change among each owner even, that it just made a lot of sense for some owners to move on and for Gannett to provide the means by which the others could move on,” Talamantes said.
Gannett’s plans call for it to give current shareholders publicly traded shares of a new business that will own all of its publishing properties, which includes USA Today. The new publishing business will be nearly debt-free.
Gannett will continue to operate as a broadcasting and digital business with holdings that include Cars.com and CareerBuilder.
Gannett’s separation from its publishing business ends one of the last holdouts in an industry forsaking the traditional marriage of newspaper and TV. It joins splits of publishing and broadcasting at Time Warner Inc., which spun off its Time Inc. magazine division this year; Tribune Co., which split this week; and Rupert Murdoch’s News Corp., which last year became 21st Century Fox Inc. for the film and TV business and News Corp. for newspapers.
“The main reason any company has done this is to separate out broadcasting, which is becoming a higher-valued asset, from publishing, which, even though it has been stabilizing, clearly has more challenges than the other part of the business,” said Jim Goss, an analyst at Barrington Research in Chicago.
Newspapers have steadily lost money and readership since hitting a sales peak in 2005. Classified advertising has been hardest hit, dropping more than 50 percent between 2000 and 2008 to $9.9 billion, according to the Pew Research Center. Competition from the Internet, including sites such as Cars.com, has cut into that revenue.