The deal, which includes $1.5 billion in cash and $715 in assumption of debt, creates a self-described "super group" with 43 stations and 
accelerates the print-to-electronic transformation of Gannett. The valuation pegs the cash-flow multiple at 9.4x without expected synergies of $175 million or 5.4x with the synergies.
Gannett Acquires Belo In $2.2 Billion Deal
In a deal that will propel it to the top ranks of broadcasting, Gannett announced this morning that it is acquiring Belo, a publicly traded pure-play TV station group, in a deal valued at $2.2 billion — $1.5 billion in cash plus the assumption of $715 of existing debt.
The cash breaks down to $13.75 per share of Belo, a 28% premium on its closing price yesterday.
The self-described “super group” will reach nearly a third of U.S. TV homes with 43 stations, including stations managed by Gannett through shared services and similar sharing arrangements.
Gannett is currently No. 6 on the TVNewsCheck-BIA/Kelsey Top 30 TV station group ranking, which is based on 2012 spot revenue. With the acquisition of No. 10 Belo, it jumps to No. 3, behind only Fox Television Stations and CBS.
According to Gannett, the deal also accelerates the transformation of the company from print to electronic media. Following the transaction, broadcasting will contribute more than half of its EBITDA, and broadcasting and digital combined will account for nearly two-thirds.
“We are thrilled to bring together two highly respected media companies with rich histories of award-winning journalism, operational excellence and strong brand leadership,” said Gannett CEO Gracia Martore. “We have been successfully transforming Gannett into a diversified multi-media company with broadcast, digital and publishing components across high-growth markets nationwide, and this is another important step in the process.
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It will significantly improve our cash flow and financial strength, enabling us to quickly pay down debt while remaining committed to disciplined capital allocation. By enhancing our portfolio with one of the largest, most geographically diverse and network-balanced TV station groups in the country, the new Gannett will be well positioned to lead innovation, bolster our existing growth initiatives and take advantage of new opportunities in the emerging digital media landscape.”
Gannett says its expects the deal to generate approximately $175 million in annual run-rate synergies within three years after closing. It calculates the selling multiple at 9.4x average 2011-12 EBITDA multiple prior to synergies, and a 5.4x multiple with the synergies.
In a note to clients, Wells Fargo broadcast securities analyst Marci Ryvicker called the deal “really good for valuations.”
“For two companies who have not been much involved in M&A, we were (positively) surprised by this morning’s announcement. Our ”gut” told us BLC [Belo] was a net seller of assets, but we are very surprised at how quickly Stage 3 consolidation has fallen upon us.
“Better yet, thinking about the rest of our coverage, if we were to apply the 9.4x fair market multiple…to NXST [Nexstar], SBGI [Sinclair], TVL [LIN] and GTN [Gray], we get stock price valuations of $50, $35, $26, and $7, respectively–and this is before any additional M&A.”
Comments (25)
kendra campbell says:
June 13, 2013 at 10:25 am
“5.4X multiple with the synergies”. What exactly does that mean? Sounds like corporate gibberish.
Angie McClimon says:
June 13, 2013 at 11:11 am
It is. Corporate babble to make it sound good.
Linda Stewart says:
June 13, 2013 at 5:15 pm
It means that after you figure in all the cost savings, retrans increases and other benefits from the deal, Gannett is paying just 5.4 times cash flow for the Belo stations. Or, at least that is my understanding.
Jaclyn Hansen says:
June 13, 2013 at 10:32 am
Sorry to see Belo go. They seemed to stand for something.
Albert Pica says:
June 13, 2013 at 10:37 am
As your username says, “Get real”. It’s always about $$$.
Angie McClimon says:
June 13, 2013 at 11:13 am
I think he means Belo might have had a more friendly corporate culture that Gannett might not have.
Trudy Handel says:
June 13, 2013 at 10:58 am
So… what happens in St. Louis and Phoenix?
Dennis Bragg says:
June 13, 2013 at 11:21 pm
Most likely they will have to sell off the station that isn’t the market leader or do the sneaky thing that Sinclair and Nexstar do is create sister station groups operated by a VP of the parent group and have virtual duopolies. It is sneeky but effective. However it does limit the amount of voices in a particular market. Job losses are inevitable if the later occurs.
Brian Bussey says:
June 13, 2013 at 11:32 am
Belo operates a skeleton crew at corp. don’t see a lot of savings there. consolidation is about laying off folks.
The acquisition will make Gannett the largest non-O&O owner of CBS affils and expand its position as NBC’s top affil owner. It will rank No. 4 in ABC affils, and the fourth-largest owner of Big Three affils overall in the country.
Roxanne Tedeschi says:
June 13, 2013 at 11:34 am
This is good for broadcasting. Belo has beem run an “air head” who knows nothing about television. Dunia in nothing more than a bombastic “hack” that has tried to run a public company. This is great for all Belo stock holders.
Deb Adeogba says:
June 13, 2013 at 12:30 pm
Possibly so. However whenever this kind of thing happens heads roll and I happen to be attached to mine.
none none says:
June 13, 2013 at 11:42 am
Phoenix is FINE. Belo has and Indy and CW. Great for Ch. 12 there. Only is St. Louis is there an ‘overlap’
Alan Whitney says:
June 13, 2013 at 11:52 am
How is Phoenix FINE? Gannett isn’t going to operate two news stations in one market. Doesn’t make any sense. There’s not really a need for an indie news station anyway. All the Phoenix people are about to be out of jobs.
Alan Whitney says:
June 13, 2013 at 11:52 am
Unless Gannett turns around and sells its Phoenix station to another media company.
Roger Lyons says:
June 13, 2013 at 1:02 pm
The problem with Phoenix is that they will own three TV stations AND the major daily newspaper and Internet portal in town. If this doesn’t bring up any red flags, what will?
Alan Whitney says:
June 13, 2013 at 1:05 pm
You’re exactly right. If that doesn’t raise red flags with the FCC and anti-trust regulators, nothing will.
Deb Adeogba says:
June 13, 2013 at 12:31 pm
We are part of what was the “Belo Family” and woke up to chaos. There are real people that are going to be greatly affected by this- *besides* stockholders and the bottom line.
Alan Whitney says:
June 13, 2013 at 1:06 pm
Thats the saddest part about this. Lives are going to be greatly disrupted.
Jamie Olofson says:
June 13, 2013 at 2:06 pm
This will be interesting in St Louis with the CBS and NBC stations doing an LMA. While at the the same time the NBC station provides a news to the Sinclair station. And the rumor is that the ABC owner-Sinclair- is close to buying the FOX owner who also controls the CW Tribune!
Alan Whitney says:
June 13, 2013 at 3:13 pm
According to this looks like St. Louis and Phoenix will operate under very limited shared service agreements, be owned and operated by other licensee’s and continue to be competitors with Gannett’s current stations in those markets
http://www.stltoday.com/business/local/gannett-to-buy-tv-station-owner-belo-for-billion/article_31e7fb91-676f-50cb-825f-9f9f6a6e6f8c.html
The shared service agreements in St. Louis and Phoenix will result in very few shared services to gain FCC approval. “Those operations will be owned by another licensee and operated by that licensee, and they will be almost completely independent operations that will compete head to to head in those markets,” Lougee said.
Andrea Rader says:
June 13, 2013 at 5:16 pm
I guess this move was inevitable when Belo split off its TV and newspaper operations. Still, it’s sad to see a good broadcaster go.
Joanne McDonald says:
June 13, 2013 at 5:32 pm
I would rather see Gannett spinning off KMOV and WHAS to Meredith, and KTVK to Scrips and combined the operations with KNXV with ABC moving to KTVK and KNXV becomes independent while KPNX is combined with KSAW.
Joanne McDonald says:
June 13, 2013 at 7:24 pm
I would rather see Gannett spinning off KMSB/KTTU, KMOV, and WHAS to Meredith, and KTVK to Scrips and combined the operations with KNXV with ABC moving to KTVK and KNXV becomes independent while KPNX is combined with KSAW. LIN could buy WSET and WCIV from Allbritton and KSTU, KDVR and turned into a CW station with KWGN getting FOX, WDAF, KTVI and turned into a ABC station with KPLR getting FOX and KDNL getting CW, WITI with the option of also acquiring WIWN from Pappas if they would want to fully sale the station in the future, WJW, WHNT, WGHP and turned into a ABC station with WXLV getting FOX, and maybe WNEP from Local TV LLC, while Meredith could buy KWGN and KPLR if Tribune would ever sale various stations to help pay off it’s debt from their 2008 bankruptcy and buy KFOR/KAUT, KFSM/KXNW, WHO, WQAD, WREG, WTVR, and WTKR/WGNT from Local TV LLC. I would allow FOX to buy KPLR and KWGN from Tribune if I still want Meredith to buy KMSB/KTTU, KMOV, and WHAS from Belo.
Alan Whitney says:
June 13, 2013 at 6:32 pm
KTVK always made more sense than KNXV as an ABC affiliate. Not sure why ABC keeps renewing its affiliation with KXNV and their weak lineup.
Andrea Rader says:
June 13, 2013 at 9:34 pm
Once this deal is finalized, how long before Gannett dumps its newspapers (except maybe USA Today?)