"We are looking aggressively at partners and deals and will make sure we do our absolute best to keep our leverage in mind," Gray Television chief Hilton Howell says. "The company is simply not for sale.”
Hilton Howell: Gray Is A Buyer, Not A Seller
Count Gray Television among broadcast industry consolidators, Hilton Howell told analysts and investors today.
Howell, chairman-CEO-president, said Gray is actively considering acquisitions that are accretive and de-levering.
“We are looking aggressively at partners and deals and will make sure we do our absolute best to keep our leverage in mind,” Howell said during the second-quarter earnings conference call.
Questions about Gray’s intentions — buyer vs. seller — arose in the wake of Bob Prather’s departure as the company’s president-COO in June.
Howell sought to answer those questions during today’s call. “Gray has a vital and integral role to play in the consolidation of this industry,” he said. “In terms of acquisitions, we have looked at [a lot] of things. The mantra from us is the company is in de-levering mode. We still are. But there are certain stations, certain groups that are a perfect fit for us…. Gray has a long road ahead in terms of being able to add those types of stations to our company.”
Driving home the point, Howell added: “The company is simply not for sale. But let it be known I know there are people who would love to buy it. I would never say never.”
For now, the focus is on growing, he said. “There’s nothing we’re working on, no contracts. But it’s fair to say we’ve been in contact with every group, every principal on one level or another. Our plans are to stay independent.”
That, he said, could include almost anything that enhances shareholder value.
Indeed, Gray has been quietly expanding its portfolio with stations in Dothan, Ala.; North Platte, Neb; and, most recently, the addition of KJCT, the ABC affiliate in Grand Junction, Colo.
Technically, News-Press & Gazette is selling KJCT to Excalibur Broadcasting, which is owned and operated by former Gray regional general manager Don Ray, for $3 million. But as part of that deal, Gray is purchasing “certain other assets” for $9 million and will provide back-office, engineering and sales support to Excalibur.
In other words, Excalibur appears to be a sidecar company that Gray’s teaming up with to avoid violating FCC duopoly restrictions. Gray already owns KKCO, the NBC affiliate in Grand Junction.
“The notion and goal [of de-levering] have not changed,” Howell said. “But the industry has changed in the last 12 months. We had [de-levering] targets out there we were planning to hit…. Acquisitions that we make like Grand Junction clearly are going to be de-levering.”
At 5.84 times trailing eight-quarter cash flow, Gray’s leverage ratio is among the highest in the industry. Since emerging from the Great Recession, when it barely avoided violating debt covenants, Gray has focused on reducing that ratio.
Those efforts appear to be paying off. The ratio was at 6.07X at the end of 2012 and company officials previously said the company was shooting for a leverage ratio in the 4s in election years and in the low 5s in non-election years.
On another hot topic — retrans disputes — Howell said Gray, as the leading CBS affiliate, strongly supports CBS in its dispute with Time Warner Cable.
“To date, Gray has never had to take stations off the air,” Howell said. “I hope that stays true in the future. But negotiations may get tough in the future. Our company needs to receive fair payment. We need to stand in lockstep with CBS. I don’t think any of our cable operators can do without us on a local basis.”