Gray Adds Larger Markets; Boosts Political Footprint

Adding the Meredith Local Media group properties finally gives Gray Television stations in its home market, Atlanta, with CBS 46 (WGCL) and independent Peachtree TV (WPCH). And Gray CEO Hilton Howell couldn’t be more thrilled.

“Let me say to those of you who may be part of those two stations, I’ve been watching you for months. I look forward to waking up early in the morning and watching you even more as we go forward. In fact, including Atlanta, the Meredith acquisition will bring Gray into nine top-40 television markets. It will also add Phoenix, Portland, St. Louis, Nashville, Hartford, Kansas City, Greenville, South Carolina, and Las Vegas. In most of these cases, Gray owns top stations in markets adjacent to these areas. And in some cases, the Meredith stations combined with our existing portfolio, will also make Gray the largest local media company in these stations’ space,” Howell told Wall Street analysts in a conference call this morning shortly after announcing the $2.7 billion acquisition.

The Meredith deal, he said, also fits with Gray’s strategy of adding stations in key states for heavy political ad spending. “One of the truly beneficial things, I believe, from this acquisition is that we are going to have a big senatorial race in Georgia [in 2022] where we have every market except Macon in Georgia — with fantastic stations. We will be completely covering all of Nevada, all of Arizona,” Howell said. And he added that the deal will greatly expand Gray’s position in other states with hot Senate races in the offing, such as Missouri.

In his own conference call, Meredith CEO Tom Harty said after careful consideration with the board of directors and its advisers, “We believe now is the right time to sell our broadcast assets.” He noted that the 10-times multiple for Meredith demonstrated a highly competitive sale process. “The scale created by the combination of Meredith Local Media Group with Gray represents a strategic fit and we are incredibly grateful to our colleagues for their years of dedicated service and industry-leading work,” Harty said. Proceeds from the $2.7 billion cash sale will extinguish Meredith’s debt, with the remainder paid to shareholders.

A couple of deal notes: The syndicated People TV show will remain with Meredith as part of the People magazine brand. Also, MNI Targeted Media will stay at Meredith.

From the Gray side, after synergies, the multiple falls to 7.9 times cash flow. In announcing the deal Monday morning, Gray said it would benefit from $55 million in annual synergies once the Meredith stations are folded in. During the call, CFO Jim Ryan said $25 million of that will come from retrans step-ups as the Meredith stations come under Gray’s contracts with MVPDs. He declined to spell out the remaining synergies. However, later in the call, Gray EVP-Chief Legal and Development Officer Kevin Latek noted that Primeon and other digital ad sales opportunities are not included in the official synergy analysis.

The only disappointment in the deal, according to Howell, is having to divest WJRT (ABC) in Flint-Saginaw, Mich., so Gray can acquire Meredith’s WNEM (CBS) there. With that, Gray will not have to seek any waiver from the FCC and also expects no problem with DOJ approval.

“Under Pete Veto’s leadership, this station and its great staff have done a tremendous job covering news and serving the people of Flint, Bay City and Saginaw for many years. Whomever purchases WJRT will be acquiring a sterling asset, a great station and a fabulous group of people that we very much wish could have remained with us after the closing of the Meredith transaction,” Howell said.

The CEO repeated his often-heard complaint that “we are greatly undervalued” by Wall Street. Gray will continue its recently revived cash dividend payment and is not changing its opportunistic share repurchase policy as it closes the pending Quincy Media and Meredith transactions — and related divestitures — later this year. The economies of the television business require scale, Howell said. And while Gray executives have maintained that Gray already has scale, the Meredith acquisition will make it the second largest television group in terms of revenue, behind Nexstar. The upside, said Howell, “is stunning.”