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In August 2014, Gannett announced it would split into two companies. One will focus on newspapers and their associated websites, and the other will hold its TV stations and stand-alone websites.

The stock is down 11% since the spinoff announcement, mainly because investors are worried about falling advertising revenue.

Still, studies have shown that after the first few months, spinoffs tend to outperform groups of comparable stocks for several years. That’s mainly because companies will only take on the costs of a spinoff when they have reason to believe it will boost the value of both the new and remaining businesses.

GANNETT CO., INC. (New York symbol GCI; www.gannett.com) is the largest newspaper publisher in the U.S., with 82 dailies, including USAToday, its flagship paper.

The company offers subscribers in 35 markets a special rate if they also take USAToday, which is partly why USAToday is the top-selling newspaper in the U.S., at 1.1 million copies a day.

Gannett publishes 443 non-daily papers in the U.S., as well as 17 dailies and over 200 weekly papers and magazines in the U.K. Publishing accounts for 57% of its revenue but just 22% of its profits.

The company also owns 46 TV stations that reach a third of the U.S. population. Broadcasting provides 29% of Gannett’s revenue and 62% of its earnings.

The remaining 14% of revenue and 16% of earnings comes from Gannett’s websites, which attract over 39 million unique visitors a month.

In response to slowing print advertising revenue, the company cut jobs and closed offices. The resulting savings helped lift its earnings to $2.18 a share (or $529.4 million) in 2012, but earnings fell to $1.62 a share (or $377.9 million) in 2013. Gannett’s revenue fell from $5.4 billion in 2012 to $5.2 billion in 2013.

To cut its reliance on newspapers, Gannett paid $1.5 billion for Belo Corp. in December 2013. Belo owns 20 TV stations, five all-news cable channels and over 20 websites. In July 2014, the company bought six more TV stations in Texas for $215.0 million. Together, these purchases doubled the size of Gannett’s broadcasting division.

The acquisitions boosted Gannett’s revenue by 15.2% in the quarter ended September 28, 2014, to $1.44 billion from $1.25 billion a year earlier.

Earnings in the quarter jumped 36.6%, to $136.3 million, or $0.59 a share. A year earlier, the company earned $99.8 million, or $0.43 a share.

Gannett expects to complete spinoff plan by mid-2015

Gannett is also investing heavily in its websites. In October 2014, it paid $1.8 billion for the 73% of cars.com, a site for selling new and used vehicles that it didn’t already own. Over 20,000 of the 46,000 car dealerships in the U.S. use this service, which has $535 million of annual revenue.

The company has also launched a business called G/O Digital that helps advertisers create and deploy campaigns that combine national and local print, TV and online ads. G/O Digital’s revenue jumped 160% in 2013.

Gannett now aims to unlock value by spinning off its publishing operations as a separate firm that will keep the Gannett name. The still-unnamed remaining company will own the broadcast and Internet businesses.

The plan needs shareholder and other approvals, but Gannett expects to complete it in mid-2015. Investors aren’t liable for capital gains taxes until they sell their new shares.

Gannett had to borrow most of the funds it needed for its recent acquisitions. As a result, its long-term debt rose 10.8%, to $4.1 billion as of September 28, 2014, from $3.7 billion at the end of 2013.

That’s a high 60% of its market cap. However, under the breakup, the faster-growing broadcasting and Internet business will retain nearly all of Gannett’s existing debt.

Combined, the two companies will pay a quarterly dividend of $0.20 a share, which is equal to Gannett’s current payout. The annual rate of $0.80 a share yields 2.7%.

The stock has tripled since November 2011 but trades at just 11.0 times the $2.72 a share that Gannett will likely earn in 2014. That’s because of concern about weaker ad revenues at the company’s newspaper business.

However, the spinoff will strengthen the publishing division’s balance sheet as it integrates its print and online operations. Meanwhile, the broadcasting/Internet company should generate higher profit margins without the print division.

Gannett is a buy recommendation of our advisory on U.S. investing, Wall Street Stock Forecaster.

Tomorrow we look at a junior uranium miner developing new mines and banking on rising global demand for nuclear power.