Media General, Young Broadcasting To Merge

The combined company will own or operate 30 network-affiliated TV stations across 27 markets reaching 14% of U.S. TV households.

Media General Inc. and privately held New Young Broadcasting Holding Co. today announced a definitive agreement to combine the two companies in an all-stock merger transaction. The new company will retain the Media General name and will remain headquartered in Richmond, Va.  

Media General owns 18 network-affiliated stations, and Young owns or operates 12 network affiliates. The combination will create a company with 30 stations operating in 27 markets, reaching 16.5 million, or 14%, of U.S. TV households. On a pro forma basis, 2012 revenues were $605 million, including approximately $115 million of political revenues.

Media General says the new company “will have a strong balance sheet, including significant tax carryover net operating losses that will survive the merger, and an enhanced credit profile, creating opportunities to refinance existing debt at a significantly lower cost of capital. The merger will be accretive to free cash flow in the first full year. The companies have identified $25 million-$30 million of operating and financing synergies.

The balance of network affiliations will include CBS (11), NBC (9), ABC (7) Fox (1), CW (1) and MNT (1). Sixteen of the 30 stations are located in the Top 75 DMAs. Media General says the new company “will be more geographically diverse and will have a presence in more markets that generate strong political revenues. Its increased size will enhance its ability to participate in retransmission revenue growth, share growth of national and digital advertising, and syndicated programming purchasing.”

Commenting on the news, media broker Larry Patrick said: “The deal simply demonstrates the ‘rolling thunder’ of TV acquisitions is continuing” (referencing a phrase from Nexstar’s Perry Sook). Patrick also said to expect similiar deals for another two years: “There are a lot more acquisitions in the pipeline.”

Station groups like Young and Media General, Patrick said: “are finding that the economics of scale and retrans are clearly making it advantageous to get larger and larger.”

BRAND CONNECTIONS

J. Stewart Bryan III, chairman of Media General, said in a statement: “The business combination of Media General and Young is a transformational event that will benefit shareholders, employees and the communities we serve. The combination provides immediate accretion to free cash flow, a strong balance sheet, the opportunity to refinance debt at a much lower cost and attractive synergies.

“Young’s management and its owners share Media General’s commitment to quality local journalism and to operating top-rated TV stations, making this merger a unique and compelling combination with significant growth potential,” he added. “I have agreed to vote all of my shares to unwind Media General’s dual-class stock structure and to approve the transaction. I look forward to benefiting as a continuing long-term shareholder in the new Media General.”

Thomas J. Sullivan, executive chairman of New Young Broadcasting, said: “This merger is compelling on many levels and will create a company with valuable strategic assets, significant financial resources and a deep team of talented and experienced personnel. Together, these two great companies will be even better positioned to prosper in today’s competitive media environment. I look forward to joining the Media General Board of Directors and working with my new colleagues.”

George L. Mahoney, president-CEO of Media General, who will retain that role following the merger, said: “We are thrilled to join forces with the Young team and add its great collection of stations and digital assets to ours. I’m very excited about the wonderful opportunities that lie ahead for the new Media General. Our stations and Young’s have earned excellent reputations as leading local content providers.
“In working with the Young management and owners over the past several months, it’s clear that we share strong values for customer focus and innovation and a commitment to harnessing the future in an age of rapid change. The new Media General will have a highly competitive broadcasting platform and a strong digital focus, particularly for mobile platforms.

“We see opportunities for organic growth and other expansion. We expect to take advantage of attractive debt markets and refinance our total debt outstanding at a much lower interest rate. We anticipate a seamless integration of operations and the ability to take advantage quickly of our new operating and financing synergies, to realize the benefits inherent in our combination. We believe the new Media General has outstanding prospects for increasing shareholder value.”

Deborah McDermott, CEO of New Young Broadcasting, said: “This is an exciting day for Young Broadcasting. We’re delighted to find an outstanding strategic business partner in Media General, with its strong stations and digital platforms in attractive markets. Our companies share a commitment to quality broadcasting.

“Combining our two companies creates opportunities for profitable growth that neither company would be capable of achieving on its own. We look forward to working with the Media General team and to realizing the tremendous potential of this merger, including attractive near-term growth opportunities.”

Under the merger agreement, Media General will reclassify each outstanding share of its Class A and Class B common stock into one share of a newly created class of Media General common stock, which will be entitled to elect all of Media General’s directors. No additional consideration will be paid to the Class B shareholders for giving up their right to directly elect 70% of Media General’s directors.

Media General will issue approximately 60.2 million shares of the new Media General common stock to Young’s shareholders. The estimated total shares outstanding after closing is 89.1 million. Media General’s pro forma ownership split will be approximately 32.5% Media General shareholders and 67.5% Young shareholders.

The new Media General common stock will be listed on the NYSE and trade under the symbol MEG, subject to NYSE approval of the listing of the new shares.

Media General’s 2011-12 average revenues were $320 million and Young’s were $219 million. Media General’s 2011-12 average adjusted EBITDA was $90 million and Young’s was $77 million. These adjusted EBITDA amounts have been normalized for acquisitions, dispositions and certain non-recurring, one-time and other items agreed upon by both parties.

Broadcast financial results in even-numbered years include political revenues and Olympics advertising, and odd-numbered years mostly reflect the absence of those revenues. The broadcast industry, therefore, typically assesses a company’s performance based on a two-year average of its financial results, which takes into account this biennial effect of political and Olympics revenues.

As of March 31, 2013, Media General’s outstanding debt was $601 million, and Young’s was $164 million. The new Media General intends to pursue a total debt refinancing of approximately $900 million, reflecting the total debt outstanding of both companies, call premiums on various debt issuances, a $50 million cash contribution to Media General’s qualified pension plan, and transaction fees and expenses. If it is able to complete the refinancing, which is subject to debt market conditions at the time of refinancing, Media General believes that its pro forma interest expense following the refinancing would be approximately $50 million per year.

Following closing, the initial board of directors will consist of 14 directors, including Media General’s current nine directors and Young’s current five directors. Mr. Bryan will serve as the initial chairman. At the 2014 annual shareholders’ meeting, the size of the board will be reduced to 11 directors and consist of five of the current Media General directors (to include the current chairman, vice chairman and president-CEO plus two others as designated by the nominating committee), the five former Young directors, and one additional director selected by the nominating committee. The Nominating Committee will consist of five directors, including three former Young directors and two current Media General directors.

The transaction has been unanimously approved by the Media General board of directors and the Young board of directors. It also has received the necessary approval of Young’s shareholders. The transaction is subject to the approval of Media General Class A shareholders and Class B shareholders, the Federal Communications Commission, clearance under the Hart-Scott-Rodino antitrust act, and customary third-party consents.

The D. Tennant Bryan Media Trust, which holds 85% of the company’s Class B shares, has agreed to vote in favor of the transaction. Media General will convene a special shareholders’ meeting to vote on the transaction.

The time, location and other details regarding this meeting will be communicated to shareholders at a later date. Media General will file a proxy statement with the SEC regarding the transaction. The proxy statement will include detailed financial and other information about Young and its business. The transaction is expected to close in the late third or early fourth quarter of this year.

The merger agreement will be included in a Form 8-K to be filed shortly with the SEC. The 8-K filing will be available on Media General’s Website www.mediageneral.com in the Investor Relations section.

RBC Capital Markets LLC and Fried, Frank, Harris, Shriver & Jacobson LLP are advising Media General. Stephens Inc. and Gibson, Dunn & Crutcher LLP are advising the independent members of the board of directors of Media General, and Stephens delivered a fairness opinion to the full Media General board of directors. Wells Fargo Securities, LLC and Debevoise & Plimpton LLP are advising Young Broadcasting.


Comments (18)

Leave a Reply

alicia farmer says:

June 6, 2013 at 9:13 am

Two bad companies merging to form a bigger bad company. Sweet.

Lidia McCall says:

June 6, 2013 at 10:11 am

You are correct…two LOSER companies forming to make a Bigger Bad Company. Media General has NO CLUE how to be a broadcaster…NBC took them to the Wood Shed when they sold them WNCN in Raleigh…what a cluster! They have Never Recovered and will Never Recover…its been one cattle call after another of talent, support, and sales staff through that station. Couple that great decision with another great decision and that was to hitch their National Sales Wagon to MMT? Where is MMT today? LOL! MMT is/was an antiquated shop run by people who have no idea what it means to do National Sales…their team OFTEN forgets who they work for…the Station…problem is good ol’ Marilyn gave this idiotic staff…Carte Blanche…Disaster! You know what…Good Ridance…
And as for YOUNG…only Four Letters tell their story…KRON!!!

    Roger Lyons says:

    June 6, 2013 at 10:40 am

    At the time MG moved their national sales to MMT (mid-’80s), they had more respect than Seltel. MMT now only exists as Cox’s division that handles national sales for Post-Newsweek. But, where is Blair (MG’s rep pre-1985)? Petry shut them down and they’re only hanging by a thread at this time.

    jennifer handshew says:

    June 6, 2013 at 5:11 pm

    TV Dinosaur – you are a bitter and negative curmudgeon. I hope that you are out of the business so I don’t ever have to work with you anywhere. Every post you make is nasty and despondent.

    Monica Patterson says:

    June 6, 2013 at 7:21 pm

    TVDinosaur your name is as current as your coments on MG and Young. You are so wrong, wrong, wrong! Young went south due to KRON and the affiliation loss. Look at their stations and they are #1 or 2 in just about every market. Look at the stock distribution of the deal and you will see who is really coming out on top. (It isn’t MG) This company will be aplayer and a major one in M&A going forward.

Clarence Bucaro says:

June 6, 2013 at 12:47 pm

It seems like the comment section always attracts the negative side of people. My personal opinion is that Media General is an excellent company. The people on the engineering and operations side of the business is some of the best people I have ever worked with. I think Young will benefit greatly from Media General’s operation. Congrats to them.

Paul Hoagland says:

June 6, 2013 at 3:46 pm

Deb McDermott finally finds a place where she’ll look like a Rhodes scholar. Oy! Two of the more inept broadcasters around. In a sane world neither would be. And who the heck is buying their $900M in debt? Good luck with that and get ready to buy a whole lot more.

antonio berretta says:

June 6, 2013 at 4:12 pm

Media General is a company that is inadequate in developing and maximizing the top line. They are great to compete against..take it from someone who took them to the woodshed daily… and they are very good in bureaucracy and doing reports for their reports..this gives the newspaper guys something to do in Richmond..Read something on paper. This company has made more bad management hires than I care to delineate. Young..Not too much better. Once these stations, which for the most part are the number 2 or 3 ranked stations in their markets..Never ever # 1, get some type of culture developed then a real leader needs to take over and take them to new heights because they are in pretty good markets overall..

    Brad Dann says:

    June 6, 2013 at 8:24 pm

    The Top Line is the problem with both companies and niether has anyone in Senior Management that has been in the trenches in charge of generating and growing revenue. You don’t/can’t learn it in the Executive Suite

Joanne McDonald says:

June 6, 2013 at 4:45 pm

I like it real well but they can sell KRON directly to NBC wtihout any bureaucratic red tape and combined the operations with KSTS to improve reception of NBC service in the bay area as a continuance of the NBC station being from KNTV NBC 11 Bay Area to KRON NBC 4 Bay Area and KRON being housed at NBC Bay Area division with KNTV being spunned off to either Hearst or a real local broadcaster with interest to keep it going plus with real benefits for both NBC finally wanting to own KRON and KNTV being spunned off and be a real San Jose orientiated station. The MYNET affiliation would go to KOFY 20. I would have liked the idea of Journal buying WLAJ with spuning off WSYM to a third party with combined operations in Lansing, Meredith buying WBAY and KELOLAND and Quincy buying KWQC as a way to help Young pay off it’s debts from it’s bankruptcy.

    Joanne McDonald says:

    June 7, 2013 at 12:42 am

    I like it real well but they can sell KRON directly to NBC without any bureaucratic red tape and combined the operations with KSTS to improve reception of NBC service in the bay area as a continuance of the NBC station being from KNTV NBC 11 Bay Area to KRON NBC 4 Bay Area and KRON being housed at NBC Bay Area division with KNTV being spunned off to either Hearst or a real local broadcaster with interest to keep it going plus with real benefits for both NBC finally wanting to own KRON and KNTV being spunned off and be a real San Jose orientiated station. I would’ve liked the idea of KRON and KNTV swapping assets such as equipment, tower, and call letters with Media General getting KNTV calls and it’s tower equipment on The San Bruno Mountain as a MYNET station targeting the San Jose area on channel 11 and NBC getting KRON calls and it’s tower equipment on the Sutro Tower as an NBC owned and operated station targeting the San Francisco, Oakland, and San Jose areas on channel 4. MYNET affiliation would go to KOFY 20. I would have liked the idea of Journal buying WLAJ with spuning off WSYM to a third party with combined operations in Lansing, Meredith buying WBAY and KELOLAND and Quincy buying KWQC as a way to help Young pay off it’s debts from it’s bankruptcy.

    israel Diaz says:

    June 7, 2013 at 9:14 am

    Comcast has really invested their name in the daily operations at KRON. They helped establish the 24 hour News Channel and NBC Universal Marketing seems to be a regular part of KRON’s programming. I think that now MG owns the group it will be an easier transition on making NBC4 a reality.

    Sean Smith says:

    November 8, 2013 at 11:02 am

    James, once again your posts have nothing to do with reality. None of the combinations you mention are feasible, possible and logical. So as usual, let’s take them apart piece by piece. Young will not sell KRON to NBC, KNTV is working fine for them, KNTV cannot leave Bruno and move to Sutro, there is no reason to target San Jose as a MYNET station, Meredith does not want WBAY or KELO, Quincy cannot afford KWQC. None of it will ever happen. You are not in television, and you don’t know how television works.

    Sean Smith says:

    November 8, 2013 at 11:08 am

    You are the only person I’ve ever heard of, who does not, and has never worked in TV, and tries to match comments with people who are close to the business. Usually, I would say everybody is entitled to their opinion, but your opinions are baseless. Update your Broadcasting Yearbook. Your comments are laughable, sophomoric and just plain stupid.

jennifer handshew says:

June 6, 2013 at 5:16 pm

Good move by both companies. MG with no newspapers to hold it down are able to bring in another good broadcasting group under the umbrella. For all the negativity posted above, consolidation is here and we are going to see more of it. I will wait to see if ever one meets the approval of the haters that seem to post bad news all the time. Must all be old news directors because in sales if you were that cynical and half-empty all the time you would need to find a new career.

    Andrea Rader says:

    June 6, 2013 at 7:14 pm

    Good point, localtvtech. We’re just starting to see what MG is capable of since shedding its newspaper assets, and the early results are encouraging. In Providence, for example, WJAR has returned to dominance; even at 7PM, their local news beats “Wheel.” The debt service is troubling, but some strategic station sales in non-core markets (KRON being an obvious example) would go a long way towards retiring that. San Francisco is the largest market without a FOX O&O – just sayin’…

    Keith ONeal says:

    June 6, 2013 at 10:14 pm

    Are you saying that KTVU 2 in Oakland is an Affiliate and NOT an O&O? NBC should sell their San Jose station and buy KRON.

Andrea Rader says:

June 7, 2013 at 4:30 am

KTVU has been owned by Cox since 1963 and is a charter FOX affiliate. If FOX buys KRON (or gives KTVU an offer it can’t refuse) an NBC O&O with transmission facilities on the Sutro Tower could prove irresistible. KNTV hasn’t achieved full parity with the other O&Os from San Bruno, and MG has a history of doing deals with NBC.


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