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Gannett to follow after Tribune? April 10, 2007

Posted by Stacey Swift in Growth, Stakeholder management, sustainable development.

During last week’s class we talked about how the Tribune should handle their large variety of different companies.  Their recent acquisitions has gotten other large newspaper companies thinking, should we be doing the same thing?  Gannettis a large publisher of USA Today and many other newspapers for small and mid-size cities (their headquarters is right by my house, its the most beautiful building….but anyways).  Recently they have been under pressure to increase their return to shareholders, as their price earnings ratio is the lowest in the industry.  Shareholders have watched Real Estate mogul Sam Zell buy out Tribune and their value increased.

The article says Gannett has a $13.2 billion value, but also $5 of debt, making it an unlikely candidate for a buy out.  They also say they could create value by spinning off its NBC stations.  This got me thinking, How much responsibility does the company really have to its shareholders?  Do they need to change their current operations just to increase their dividends to shareholders?  Currently their annual dividend is $1.24, but Barrons says they could technically afford to give $4 per share, or they could spin of their stations to increase profits.  Are they responsible to give shareholders as much as they can?  With huge conglomerates such as Tribune, smaller corporations are under even more pressure to increase profits.  Do you think that Sam Zell is setting a trend and we will begin to see more buyouts in the future?



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