Gray Buying Meredith Local Media For $2.7 Billion
Gray Television has agreed to acquire all outstanding shares of Meredith Corp. for approximately $14.50 per share in cash, or $2.7 billion in total enterprise value after the spin-off of Meredith’s National Media Group to the current Meredith shareholders. The parties expect to close the transaction in the fourth quarter of 2021.
Immediately prior to closing this acquisition, Meredith will spin off to its existing shareholders its National Media Group operating division, which owns the nation’s largest portfolio of magazines as well as digital and marketing assets. At the closing, Gray will acquire Meredith’s other operating division, known as the Local Media Group, which owns the following 17 television stations in 12 markets:
- WGCL (CBS)-WPCH (ind.) Atlanta (DMA 7)
- KPHO (CBS)-KTVK (ind.) Phoenix (DMA 11)
- KPTV (Fox)-KPDX (MNT) Portland, Ore. (DMA 21)
- KMOV (CBS), St. Louis (DMA 23)
- WSMV (NBC) Nashville (DMA 29)
- WFSB (CBS) Hartford-New Haven, Conn. (DMA 32)
- KCTV (CBS)-KSMO (MNT), Kansas City, Mo. (DMA 34)
- WHNS (Fox), Greenville-Spartanburg, S.C. (DMA 35)
- KVVU (Fox) Las Vegas (DMA 40)
- WALA (Fox) Mobile, Ala. (DMA 57)
- WNEM (CBS), Flint-Saginaw, Mich. (DMA 73)
- WGGB (ABC-Fox)-WSHM-LD (CBS), Springfield, Mass. (DMA 116)
Gray currently operates in only one of these television markets, the Flint-Saginaw DMA. To facilitate regulatory approvals for this transaction, Gray will divest its ABC affiliate in the market, WJRT, to an independent third-party no later than the closing of the Meredith acquisition.
With a combined net revenue exceeding $3.1 billion on a blended 2019-20 basis, Gray said its acquisition of Meredith’s television stations will transform Gray into the nation’s second largest television broadcaster. Gray’s portfolio of television stations, including all announced transactions and less divestitures, will serve 113 local markets reaching approximately 36% of U.S. television households.
The transaction augments Gray’s position as the largest owner of top-rated local television stations and digital assets in the United States, with a pro forma portfolio including 79 markets with the top-rated television station and 101 markets with the first and/or second highest rated television station according to Comscore’s audience measurement data.
Gray’s Executive Chairman and CEO Hilton H. Howell said: “The television station portfolios, company cultures, and commitments to localism of Gray and Meredith are highly complementary. We are very excited to acquire Meredith’s excellent television stations, and we look forward to welcoming its employees into the Gray family. Moreover, Gray’s Board and shareholders are deeply appreciative of the tireless efforts of our team led by Kevin Latek and Jim Ryan on this transaction and our other recently announced significant transactions. Building on our successes throughout 2020 and just the first few months of 2021, Gray Television clearly has an even stronger and brighter future than ever!”
Gray said it expects that the Meredith transaction will be significantly accretive to free cash flow per share. To date, Gray has identified an estimated $55 million in synergies annualized for the first full calendar year following the closing. Including these anticipated $55 million of synergies, the purchase price for Gray’s acquisition of Meredith represents a multiple of approximately 7.9 times a blended average of the Meredith television stations’ 2019/2020 operating cash flow.
The transaction is subject to customary closing conditions and regulatory approvals, including certain consents necessary to effectuate the spin-off of Meredith’s National Media Group immediately prior to the closing of Gray’s acquisition of Meredith. Importantly, it said, “the proposed transaction will not create any new duopolies of local television stations.”
Moreover, giving effect to the FCC’s UHF Discount, the pro forma portfolio of television stations will reach approximately 25% of US television households, which is well below the FCC’s national audience cap of 39%. As a result, subject to the anticipated divestiture of WJRT, Gray said the deal “complies with all FCC ownership rules without the need for any rule waivers.”
Wells Fargo has underwritten the debt financing portion of the transaction. Expected strong free cash flow generation through the closing of all pending transactions and throughout 2021 and 2022 is anticipated to allow Gray to deleverage its capital structure following the closing. Assuming a year-end 2021 closing, Gray anticipates that its total leverage ratio, net of all cash, would approximate 5.3 times on a trailing eight-quarter operating cash flow, including estimated annualized synergies from all announced transactions.
The transaction has been approved by the boards of directors of both Gray and Meredith. No Gray shareholder vote will be required to consummate the transactions described herein. Completion of the transaction is subject to approval by Meredith’s shareholders. Meredith’s significant shareholders Gray’s Pro Forma Television Portfolio have entered into agreements with Gray to support the transaction