Gannett Using Acquisitions To Drive New Strategy - Tegna (NYSE:TGNA), Gannett Co (NYSE:GCI)

According to the note from Jefferies published Tuesday, the acquisition of ReachLocal by

Gannett Co IncGCI

for $156 million increases the company's digital presence and provides a way for it to shift away from former parent

Tegna IncTGNA

"While the deal is expected to close in 3Q, RLOC will remain standalone until the expiration of GCI's agreement w/ TGNA (mid-2017). GCI's ongoing M&A should continue to drive the narrative; however, we remain cautious on the core business," wrote Jefferies.

Gannett's financials will show nearly $1 billion digital revenue after the deal is closed, which represents almost one-third of the total sales. According to the analysts, while the core publishing business will maintain its dominance as a key focus for investors, digital will be more and more visible and trigger growth of the company.

The analysts kept their Hold rating unchanged. A current $17 PT assumes 6.1x F16E EBITDA.

At time of writing, Gannett traded down 1.62 percent on the day at $13.40.

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