It's fairly quiet out there this AM, so I'm highlighting Belo (NYSE:BLC), which just announced a plan to create separate television and newspaper businesses by spinning off the newspaper business into a publicly-traded company.
Note that Citigroup was out on BLC on July 30 with call saying BLC's Newspaper unit trades at 0.3x EBITDA, almost free and well below 10x peer avg, more than accounting for newspaper industry woes. While an LBO or full spin-off of TV business seems unlikely near term, they continue to think BLC would entertain other alternatives like partial spin (ala CCO).
Citi reited their Buy rating and $25 target on BLC.
Notablecalls: BLC is bound to trade up from here following today's news. This is the news many have been expecting from BLC's management and I would not be surprised to see the stock up as much as 15-20% today.
A simple calculation shows that based on Friday's closing price, if one applies BLC's TV unit with a 07 multiple in line with its peers, the Newspaper group has almost zero value. Considering the Newspaper group can produce an EBITDA of around $140 mln in 07 and applying a low 7x multiple on it (peers trade around 10x), it has a value of around $1 bln. That implies some serious ($9-10) upside.
Being a pessimist by nature, I expect to see 1/3 of this upside occur today. Grab it if you can.