The two companies say the deals should satisfy regulatory requirements related to their pending merger. As part of the arrangements, Media General is buying two stations in Colorado Springs and one in Tampa from Sinclair Broadcast Group.
Media General Inc. and LIN Media today agreed to sell or swap television stations in five markets to comply with FCC ownership rules affecting the merger they announced on March 21. Media General also announced today that in light of the loss of CBS affiliation of LIN’s WISH Indianapolis, it was lowering the per-share price of the deal from $27.82 to $25.97.
Regulatory authorities are requiring the divestiture of stations in the following markets: Birmingham, Ala.; Providence, R.I.-New Bedford, Mass.; Mobile, Ala.-Pensacola, Fla.; Green Bay-Appleton, Wis.; and Savannah, Ga. The companies said they believe that no other market divestitures will be required.
Media General and LIN are swapping stations with Sinclair Broadcast Group
Sinclair picks up Media General’s NBC affiliate in Providence-New Bedford (DMA 53), WJAR, and LIN’s Fox and CW affiliates in Green Bay-Appleton (DMA 71), WLUK and WCWF, respectively. In addition, Sinclair will also acquire WTGS, the Fox affiliate in Savannah (DMA 92), from LIN-backed WTGS Television. LIN has been operating WTGS under a shared services agreeement.
In exchange, Media General will acquire Sinclair’s Fox and CW affiliates in Colorado Springs-Pueblo, Colo. (DMA 89) — KXRM and KXTU, respectively — and Sinclair’s MyNetworkTV affiliate in Tampa-St. Petersburg-Sarasota, Fla. (DMA 14), WTTA.
As part of the transaction, Sinclair will pay $31 million for an additional $3.4 million of cash flow being swapped.
Meanwhile, Hearst Corp. will acquire Media General’s NBC affiliate in Birmingham (DMA 45), WVTM, and LIN’s ABC affiliate in Savannah (DMA 92), WJCL. The price of that deal was not disclosed.
And Meredith Corp. will acquire LIN’s Fox affiliate in the Mobile-Pensacola WALA for approximately $86 million, according to Meredith.
“We’re pleased to announce this divestiture plan, which we believe should clear the way for our business combination with LIN Media to move forward in the regulatory approval process,” said George L. Mahoney, president-CEO of Media General. “Additionally, the purchase of the MyNetworkTV station in Tampa provides us with the opportunity to increase share in Media General’s second largest market. Also, the addition of the Fox and CW affiliates in Colorado Springs marks the first time we will have a television station in Colorado.
“The stations being divested are strong performers. We are proud of the work that they have done, and we wish the employees at these stations all the best as they transition to new ownership,” Mahoney added.
Vincent L. Sadusky, president-CEO of LIN Media, said: “The divestiture plan is an important milestone that positions us well with regulatory authorities. We are pleased with the consideration we will receive for these terrific stations and plan to use the net proceeds to reduce debt. The addition of stations in Tampa and Colorado Springs will further diversify and strengthen the combined company’s portfolio as well as provide opportunities to expand our digital business. I am more confident than ever that the combination of Media General and LIN Media, two highly respected broadcasters with superior television and digital assets, creates maximum value for shareholders.”
Sadusky will become the president-CEO of the combined company following the completion of the merger.
Media General said it will structure the transactions, along with its previously announced purchase of WHTM Harrisburg, Pa., to maximize tax efficiencies.
The stations to be acquired, including WHTM, have a combined broadcast cash flow of approximately $21 million, based on 2013-14 averages. The stations to be divested have a combined broadcast cash flow of approximately $37 million, based on 2013-14 averages. Gross proceeds for all stations to be divested will be approximately $360 million.
The aggregate purchase price for the stations to be acquired, including WHTM, will be approximately $177 million. Net proceeds, after taxes and expenses, are expected to be in the range of $140 million to $160 million and will be used to reduce Media General’s debt after the closing of the merger.
The divestitures and acquisitions are contingent upon regulatory and other customary approvals and upon the completion of the transaction, except for Media General’s previously announced purchase of WHTM, which is expected to close in the third quarter of 2014. Media General and LIN Media continue to expect that the business combination will be completed in early 2015.
Sinclair CEO David Smith said that the swaps with Media General and LIN benefit Sinclair in multiple ways.
“This transaction not only allows us to strengthen our portfolio geographically, but because it frees up 0.7% of national ownership cap, it allows us the ability to acquire additional television stations that are core to our asset base,” said David Smith, President and CEO of Sinclair. “The Green Bay stations complete our coverage of all the major cities in Wisconsin, an important political swing state. The NBC affiliate in Providence is the No. 1 station in the market and provides us another state capital presence, while the Savannah station strengthens our existing presence in Georgia and the Southeast.
“Although there is a need for regulatory reform to increase the ownership cap, swaps like this one are advantageous to us in that we are trading a single station MyNet affiliate in a large market,
allowing us to acquire quality television stations in smaller DMAs.”
Hearst was ready to disclose terms of its deal. “This acquisition fits perfectly with Hearst Television’s portfolio of Southeast television stations,” said Hearst Television President Jordan Wertlieb. “We continue to evaluate strategic opportunities to strengthen our station group by adding stations that serve their communities with news and local programming in growth markets.”
Upon the closing of the transaction and these divestitures and acquisitions, including WHTM, the combined Media General and LIN Media will own and operate or service 71 stations across 48 markets, reaching 27.6 million or 24% of U.S. television households. The companies continue to expect to realize combination run-rate synergies of $70 million in three years with approximately one-half of that amount realized by the end of the first year following the completion of the transaction.
Moelis & Co. served as the exclusive financial advisor to Media General in connection with the divestitures and acquisitions. LIN Media used the Minority Media and Telecommunications Council’s brokerage services.