McLEAN, Va. – TEGNA Inc. today 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.
The spin-off will be affected 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, 2017. Stockholders will retain their TEGNA shares and receive one share of Cars.com for every three shares of TEGNA stock they own on that date. Cars.com shares are expected to begin “regular way” trading on June 1, 2017.
The spin-off remains subject to the conditions described in the preliminary information statement filed by Cars.com on Form 10 with the U.S. Securities and Exchange Commission.
“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,” said TEGNA President and CEO Gracia Martore, who will retire upon the closing of the spin-off. “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.”
According to the company’s announcement, Dave Lougee will replace Martore as TEGNA’s president and CEO, while Alex Vetter will continue serving as President and CEO of Cars.com upon completing of the separation.
“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,” Vetter said. “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, while Cars.com will trade regular way on the New York Stock Exchange under the symbol CARS. Holders of TEGNA common stock who sell TEGNA shares regular way on or before May 31 will also be selling their right to receive shares of Cars.com common stock in the distribution.
John A. (Jack) Williams, president of TEGNA Digital, will also retire upon the closing of the spin-off. “Jack joined the company 22 years ago and has been instrumental in leading our Digital portfolio since 2008,” Martore said. “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. The company also intends to invest in organic growth initiatives and selective acquisitions to create shareholder value but does not anticipate paying a cash dividend.
It is expected that TEGNA’s existing credit facility will remain in place following the transaction, officials said, and the company expects to target long-term leverage levels in line with its peers. The company 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.
Additionally, TEGNA expects to pay a regular cash dividend of $0.28 per share annually.
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. The board 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.
As for Cars.com’s board of directors, Scott Forbes will serve as chairman following the separation. The board will include Vetter and current TEGNA director Jill Greenthal, who will retire from the TEGNA board concurrently with the completion of the spin-off. In addition, upon completion of the separation, Thomas Hale, Donald McGovern and Greg Revelle are expected to serve on the Cars.com board.
Greenhill & Co. is acting as financial advisor on the separation transaction and Wachtell, Lipton, Rosen & Katz is acting as legal advisor.