In another sign of tough times for publicly held newspaper concerns, Dallas-based Belo Corp. said Monday that it has approved plans to split its TV station and newspaper holdings into two separately traded stocks.
Plan approved by Belo’s board calls for the company to spin off its newspapers — which include the Dallas Morning News — into a new entity dubbed A.H. Belo Corp., as the parent company was known until it was renamed Belo Corp. in 2001. Belo’s 20 TV stations, including Big Three affiliates in such top markets as Dallas, Houston, Phoenix and Seattle, will continue to operate as Belo Corp. The split is expected to be completed by the first quarter 2008.
Belo shares, hammered in recent months by the industrywide weakness in local broadcasting and newspaper ad-sales markets, shot up $3.25, or nearly 19%, on Monday to close at $20.61.
Still, the move raised some eyebrows on Wall Street because the planned tax-free distribution of shares in the new A.H. Belo Corp. to existing shareholders will load up the TV station side with debt even as it loses the revenue generated by the publishing assets. According to the Associated Press, Fitch Ratings downgraded Belo Corp. debt to junk status, while Moody’s Investor Service hinted it may take the same step.
“The decision to create separate television and newspaper companies recognizes the profound yet distinct changes occurring in these industries and the appeal of the separate businesses to discrete investor groups,” said Belo Corp. chairman-CEO Robert Decherd. Decherd will become chairman, prexy and CEO of A.H. Belo Corp. after the spinoff, and he’ll serve as non-exec chairman of Belo Corp. Dunia Shive, prexy and chief operating officer of Belo Corp., will become prexy-CEO of Belo Corp. following the split.