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(B)(N) GCI Gannett Company Incorporated

June 14, 2013

Deal Book. The Gannett Company was founded in 1906 in McLean, Virginia, and is one of the oldest newspaper and publication chains in the U.S. but that industry is re-shaping itself into media companies and media companies are buying content, all of which is funded by telephones, subscriptions, and advertising.

It’s a virtuous cycle that is eternal and made possible by production, income, consumption, and savings, which is what we’re all about.

Courtesy: The Gannett Company

Gannett, despite its media heft, is not really a big company as companies go; it has a market value of about $6 billion and it is acquiring the Belo Corporation for $1.5 billion in cash which will help its shift into a multimedia company and broadcasting to about 30% of the U.S. market (The Associated Press, June 13, 2013, Gannett agrees to buy Belo for $1.5 billion in cash; deal would boost TV operations).

Both companies are trading substantially above the price of risk and have been in the Perpetual Bond™ since much lower prices in 2009 and again in 2011. Please see Exhibit 1 and 2 below, Red Line Stock Price (SP) above the Black Line Risk Price (SF) and for no other reason.

Obviously, we should think about protecting our good fortune against the various predators that begrudge us our savings from income that is earned other than by our daily labors in their mines and factories.

Our estimate of the downside volatility in the stock price of Gannett is minus ($3.50) per share and we can afford the hit on a stop/loss at $23, but this deal is likely to take a long time to complete because various regulatory agencies will need to sign-off on it and the options market is quite a show in itself.

We can buy the October put at $24 for $2.15 per share today and sell an offsetting call at $27 for $1.50 per share so that for the price of holding the stock at $26 and the collar at $0.65 per share ($2.15 less $1.50), we can go back to our reading for the next several months and just collect our dividends that are $0.20 per share per quarter for a current yield of 3%.

We also notice that the market has just come alive after the announcement and one wonders what they think they’re buying other than a long wait and a lot of downside, and we’re selling them our Belo stock now.

The worst that can happen is that we might want to buy it back later at lower prices and, in the meantime, there’s lots of opportunity that is provably “as good as cash” and “better than money” elsewhere and more stocks that we sell them later, when the time is right.

Exhibit 1: (B)(N) GCI Gannett Company Incorporated – Risk Price Chart

(B)(N) GCI Gannett Company Incorporated

(B)(N) GCI Gannett Company Incorporated

Gannett Company Incorporated is an international media and marketing solutions company, delivering content and services across an integrated, multi-platform portfolio.

(Please Click on the Chart to make it larger if required.)

From the Company: Gannett Company Incorporated operates as a media and marketing solutions company in the United States and internationally. It operates through three segments: Publishing, Digital, and Broadcasting. The Publishing Segment operates 82 U.S. daily publications with affiliated online sites, including USA TODAY, a national, general-interest daily publication;; USA WEEKEND, a magazine supplement for publishing companies; Clipper magazine, a direct mail advertising magazine; magazines for nurses and allied health professionals; and military and defense publications. It also operates 17 paid-for daily publications; approximately 200 weekly publications, magazines, and trade publications; and 480 non-daily publications for commercial printing and various smaller businesses. In addition, this segment engages in commercial printing, newswire, marketing, and data services operations. The Digital Segment operates, an online job site to help companies target, attract, and retain talent; PointRoll, which provides multi-screen digital advertising and technology services; ShopLocal that offers multichannel shopping and advertising services; and, a group of product review Web sites that provide comparative reviews of technology and household products and services. The Broadcasting Segment operates 23 television stations and affiliated online sites, which offer news, entertainment, and advertising content; and Captivate Network, a national news and entertainment network that delivers programming and full-motion video advertising on video screens located in elevators of office towers and hotel lobbies in North America. The company has strategic business relationships with CareerBuilder, LLC; Classified Ventures;; and Topix. Gannett Company Incorporated was founded in 1906, has 31,000 employees, and is headquartered in McLean, Virginia.

Exhibit 2: (B)(N) BLC Belo Corporation Incorporated – Risk Price Chart

(B)(N) BLC Belo Corporation Series A

(B)(N) BLC Belo Corporation Series A

Belo Corporation operates as a television company in the United States. The company owns 20 television stations, including ABC, CBS, NBC, FOX, CW, and MyNetwork TV affiliates, as well as their associated Web sites in 15 markets.

(Please Click on the Chart to make it larger if required.)

From the Company: Belo Corp. operates as a television company in the United States. The company owns 20 television stations, including ABC, CBS, NBC, FOX, CW, and MyNetwork TV affiliates, as well as their associated Web sites in 15 markets. It also owns two regional cable news operations, including Texas Cable News in Dallas/Fort Worth, Texas; and Northwest Cable News in Seattle/Tacoma, Washington. In addition, the company owns three local news channels comprising 24/7 NewsChannel in Boise, Idaho; NewsWatch on Channel 15 in New Orleans, Louisiana; and the 3TV 24/7 news channel in Phoenix, Arizona. Belo Corp. was founded in 1842, has 2,500 employees, and is headquartered in Dallas, Texas.

The Price of Risk

The calculated Risk Price (SF) is a provably effective estimate of the “price of risk” which is “the least stock price at which the company is likeable” (Goetze 2006) and “likeability” is determined by the demonstrated factors of “risk aversion” – we want to keep our money and obtain a hopeful return above the rate of inflation – and the properties of portfolios of such stocks. Stock prices that are less than the price of risk can be said to be “bargain prices” but with the risk attached that the company might never get a higher price other than that due to ambient volatility or “surprise”; on the other hand, investors who are willing to pay the “full price” above the price of risk, and buy and hold the stock at those prices, must also be confident, and have reason to believe, that the company will produce those values, absent new information.

Please see our Posts, The Price of Risk, August 2012 and The Nash Equilibrium & Its Stock Price, October 2012, for more information on the theory.

To see what else “risk averse” investing can do for us, please see our recent Posts, The Wall Street Put, April 2013, and earlier Posts such as The Dow Transports, March 2013, or The Risk Adjusted Dow, March 2013, or The Canada Pension Bond, February 2013, and for a more colorful description of investment risk and the application of the “price of risk” to mergers & acquisitions, please see our Post, Bystanders & Collateral Damage, April 2013.


We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™“
Alpha-smart with 100% Capital Safety and 100% Liquidity”
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.

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