NEW YORK: Shares of Gannett shot up in today’s trading after one of its institutional investors bought a bigger chunk of the company. Ariel Capital Management of Chicago boosted its stake in Gannett (NYSE: GCI) from 4.9 percent to 12.5 percent. GCI shares climbed from an open of $2.85 in yesterday’s trading to end the day at $3.75. Ariel’s 28.8 million shares of GCI common stock made a 40 percent gain over the course of the trading day.
GCI shares have taken a beating in the recession as the newspaper business all but implodes entirely. Gannett is primarily a newspaper business with some TV stations. The company has 85 dailies, more than 850 non-dailies and 23 TV stations. Earlier in the week, it issued a private exchange offer of $200 million in debt due 2011 and 2012 for higher-interest notes due four years later. Previously, it cut salaries and imposed furloughs for its entire workforce, including CEO Craig Dubow.
The economic downturn has intensified GCI’s struggle with debt it took on to repurchase its own stock. It posted a 2008 loss of $6.6 billion on hefty write-downs. Debt stands at about 3.6 times equity. Moody’s dropped the company’s debt rating to junk in February. Standard & Poor’s did so in early March. GCI opened the year at $8 a share and dipped below $2 in March before embarking on the current measured rebound.
Ariel portfolio manager John Miller told Dow Jones NewswireGCI was undervalued.
“If you look at the media space, there’s a lot of negative sentiment out there,” he said. “We feel investors have overreacted in some of these names…. We feel confident they have the balance sheet to weather this economic storm, and we think 2010 will be better than 2009. There are secular issues impacting the economics of the newspaper business, but we think there are also a lot of cyclical issues impacting it as well.” -- Deborah D. McAdams
