A group of newspaper publishers has put the cars.com online
marketplace up for sale for as much as $3 billion, hoping to cash
in on booming values for e-commerce sites, people familiar with the
plans said.
Moelis & Co., which is advising the Classified Ventures
publishers consortium on the sale, already has begun discussions
with potential bidders, which are expected to include
private-equity firms and strategic investors, the people said. It
is also possible that one of the publishers could raise its stake
or buy out the others.
Gannett Co., for instance, which owns around 27% of Classified
Ventures, has signaled that it could raise or sell its stake,
depending on the price, according to two people familiar with the
company's thinking.
If a deal is struck, it effectively would unwind Classified
Ventures, an online ad-listings firm. In addition to Gannett, whose
newspapers include USA Today, the consortium's owners are Los
Angeles Times publisher Tribune Co., Dallas Morning News publisher
A.H. Belo Corp., Miami Herald owner McClatchy Co. and Graham
Holdings Co., the former owner of the Washington Post. Classified
Ventures last week said it planned to sell its other main property,
apartments.com, to CoStar Group Inc. for $585 million.
The moves to break up Classified Ventures come as the market for
e-commerce sites has been heating up. In January, Providence Equity
Partners sold a 25% stake in the AutoTrader classifieds site to
majority owner Cox Enterprises Inc. for $1.8 billion. Providence
reaped three times its original investment in AutoTrader as a
result of the sale and a dividend AutoTrader paid to Providence in
2012.
Meanwhile, the shares of e-commerce companies such as Yelp Inc.
and Priceline Inc. have soared over the past year, driven in part
by the gradual shift of commerce to online venues. AutoTrader, for
example, has reported steadily increasing sales.
Cashing out now while the market is hot is of further appeal to
Classified Ventures' owners amid concerns that Web giants such as
Google Inc. and Amazon.com Inc. eventually could emerge as
competitive threats, the people familiar with the plans said.
Started in 1997, Classified Ventures was aimed at giving its
newspaper-publisher owners a toehold in what was then a nascent
market for online auto and rental classifieds. Cars.com attracts
around 11 million car shoppers a month, according to its website,
while AutoTrader says it reaches 14 million car buyers monthly.
Classified Ventures generates tens of millions of dollars in
annual dividends for its owners. That helps offset the industrywide
decline in print advertising, including classifieds, that has
devastated the newspaper sector over the past few years.
But the original rationale for the Classified Ventures
arrangement has diminished as newspapers have become less important
to several of its owners.
The Graham family, which controls Graham Holdings, last year
sold the flagship Washington Post. And Gannett and Tribune have
been expanding in television broadcasting through acquisitions.
Tribune this year plans to spin off its newspapers into a separate
company called Tribune Publishing. Its digital assets, such as its
Classified Ventures holding, won't be part of the spinoff.
By selling the Classified Ventures businesses, the publishers
can raise money for investment in areas they see as offering better
growth prospects, or to return money to shareholders.
Cars.com generates around $400 million to $500 million in
revenue a year, according to a person familiar with the site. But a
new owner potentially could tap roughly an additional $200 million
annually. That revenue currently is distributed directly to the
owners separate from the dividends they receive, through sales
agreements that allow their newspapers to handle ad sales on behalf
of Cars.com in many local markets.
Those arrangements could be eliminated by a change of ownership,
which would allow the buyer to consolidate nationwide sales
operations under a single entity, a person said.
One question weighing on the sales process is the possibility
that some of the owners will retain their stakes. That would limit
an outside buyer's ability to boost revenue by canceling the
affiliate-rights agreements, lowering the site's value.
Write to William Launder at william.launder@wsj.com, Dana
Mattioli at dana.mattioli@wsj.com and Mike Spector at
mike.spector@wsj.com
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