Tronc Strategy of Selling Assets Applauded by Investors – Stock Up 26%

Tronc

Tronc (NASDAQ:TRNC) announced the sale of its newspaper’s, the San Diego Union-Tribune and the Los Angeles Times, amongst other community-based papers for 500 million to its shareholder Patrick Soon-Shiong.

TRNC stock soared almost 26% following the announcement of the sale. The stock gained close to 40% of price appreciation in the last six months.

Tronc

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Apart from the San Diego Union-Tribune and the Los Angeles Times, the company’s newspaper portfolio includes the Baltimore Sun, Chicago Tribune, and the recently acquired – New York Daily News, along with other papers. This acquisition has the potential to expand Tronic presence to ten key U.S. media markets.

CEO Justin Dearborn said, “The acquisition of the New York Daily News provided us with another strategic platform for growing our digital business, expanding our reach and broadening our services for advertisers and marketers.  We now serve 10 major U.S.markets, including each of the top three, hold 105 Pulitzers and have over 81 million unique monthly digital visitors.”

Tronc’s shares continue to gain support from the cost-cutting strategies that has been allowing it to turn negative revenue growth into substantial profits.  In Q3, its revenue dipped 6.6% year over a year.

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Despite lower revenues, the company generated positive earnings of $2.1 million, compared to the loss of $10 million in the past year quarter. The strategy of cutting costs by 31% year over year led the company to post solid earnings.

With the sale of the San Diego Union-Tribune and the Los Angeles Times, the company now appears in a very strong position to support investments in growth opportunities.

Moreover, its internal cash generation seems strong enough to support capital requirements.

In the latest quarter, Tronc generated an operating cash flow of $10.2 million, relative to the capital expenditures of $3.8 million. Although its debt and pension liabilities increased by $19 million in the previous quarter, the $500 million newspapers sale will allow it to reduce the debt.

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