Tegna Board OKs Spin-Off Of Cars.com

Tegna Inc. on Wednesday evening announced that its board of directors has approved the previously announced spin-off of Cars.com, which will create two publicly traded companies: Tegna, a media company with the largest broadcast group among major network affiliates in the top 25 markets; and Cars.com, a leading digital automotive markeplace.

The spin-off will be effected through a pro rata distribution of all outstanding shares of Cars.com to Tegna stockholders of record at the close of business on May 18. Stockholders will retain their Tegna shares and receive one share of Cars.com for every three shares of Tegna stock they own.

Gracia Martore, Tegna president-CEO, who will retire upon the closing of the spin-off, said: “Today’s milestone brings us one step closer to creating two industry-leading companies with the right focus, resources and leadership to capture the unique opportunities in each of their rapidly evolving industries. This spin-off is the culmination of a multi-year transformation of our company, and the board is confident that both companies are well positioned to execute their strategic plans for growth and create shareholder value.”

Dave Lougee, who will be president-CEO of Tegna upon completion of the separation, added: “I am honored to lead Tegna into the future at such a pivotal time for our company. With our strong capital structure, we are well-positioned to take advantage of current and future regulatory changes. We will continue Tegna’s history of serving our local communities by creating and distributing innovative and compelling content across a wide range of platforms and by providing our clients marketing tools and services to enable them to succeed in the digital age.”

Alex Vetter, who becomes president-CEO of Cars.com upon completion of the separation, said: “We are approaching a watershed moment for Cars.com and I couldn’t be more excited about our future. As an independent company, we have greater flexibility to capture the opportunities ahead of us by leveraging our strong brand, innovative platform and expanding, loyal audience. We are a pure-play digital company in an excellent position to drive long-term growth and profitability, and we are a unique investment opportunity in the digital automotive space.”

Upon completion of the separation, Tegna will continue to trade on the New York Stock Exchange under the ticker symbol TGNA and Cars.com will trade on the New York Stock Exchange under the symbol CARS. 

John A. “Jack” Williams, president of Tegna Digital, will retire upon the closing of the spin-off. Martore added: “Jack joined the company 22 years ago and has been instrumental in leading our Digital portfolio since 2008. I want to thank Jack for all that he has done for this company and wish him well in his retirement.”

 Prior to the separation, Cars.com will make a one-time cash distribution of $650 million to Tegna. Cars.com expects to enter into new credit facilities with borrowing capacity of approximately $900 million and expects a portion of the facilities will remain undrawn at closing. It intends to invest in organic growth initiatives and selective acquisitions to create shareholder value and does not anticipate paying a cash dividend.

It is expected that Tegna’s existing credit facility will remain in place following the transaction, and the company said it expects to target long-term leverage levels in line with its peers.

Tegna added that it intends to use the $650 million tax free distribution from Cars.com and cash flow from operations to reduce leverage and, to that end, will extinguish its current share repurchase program, with plans to reassess in the future.

Tegna expects to pay a regular cash dividend of $0.28 per share annually. The company intends to continue investing in organic and strategic growth opportunities and also intends to maintain the financial flexibility to pursue strategic acquisitions when appropriate.

Current Tegna Board Chairman Marjorie Magner will continue to serve as chairman of Tegna’s board of directors following the separation and will be joined by Lougee. Tegna’s board of directors will also include current Tegna directors Jennifer Dulski, Howard D. Elias, Lidia Fonseca, Scott K. McCune, Henry W. McGee, Susan Ness, Bruce P. Nolop and Neal Shapiro.

Scott Forbes will serve as chairman of the Cars.com board of directors following the separation. The Cars.com board will also include Vetter and current Tegna Director Jill Greenthal. In addition, upon completion of the separation, Thomas Hale, Donald McGovern and Greg Revelle are expected to serve on the Cars.com board. Greenthal will resign from the Tegna Board concurrently with the completion of the spin-off.