Gray Buying Yellowstone Stations

Gray Television today announced that it is purchasing Yellowstone Television LLC, which comprises:

• KGNS Laredo, Texas (DMA 184).  Its channels are affiliated with NBC, CW and Telemundo.

• KGWN Cheyenne, Wyo.-Scottsbluff, Neb. (DMA 196).  Its channels are affiliated with CBS and CW.  KGWN extends throughout the market via KSTF Scottsbluff, Neb., and K19FX  Laramie, Wyo.

• KCHY-LP Cheyenne-Scottsbluff (NBC).  It will now integrate its operations with KGWN.

• KCWY Casper, Wyo. (DMA 197).  Its primary channel is affiliated with NBC.

Gray purchased a 99% non-voting interest in Yellowstone for $23 million and began operating the Yellowstone stations pursuant to a local marketing agreement. Subject to receipt of regulatory and other approvals, Gray will acquire voting control of Yellowstone in a subsequent transaction that is expected to close in the fourth quarter of 2013 or the first quarter of 2014. Additional terms were not disclosed.

The transaction purchase price represents a multiple of 6.2 times a blended average of 2013-2014 pro forma broadcast cash flow of the stations.  The transaction will be immediately accretive to Gray, the company said. 

According to BIA revenue data,  KGNS, KGWN and KCWY are each the highest ranked television station in their markets.

Wells Fargo Senior Analyst Marci Ryvicker was bullish on the news. “Although not a significant transaction in size, we do think Yellowstone fits in with [Gray]’s M&A criteria and is a start to the company’s roll-up strategy. KGNS-TV, KGWN-TV and KCWY-TV are the highest ranking television stations in their respective markets, according to BIA revenue data, ensuring a good ”fit” with [Gray]’s M&A criteria.

Jason Wolff, the president of Yellowstone, said: “This group of stations is distinguished by their demonstrated market success and commitment to their local communities.  While selling the group was a difficult decision, Gray Television will provide these stations and their fine employees with tremendous opportunities to build upon their successes.”

“Gray is thrilled to have the opportunity to expand into three new, dynamic markets through the acquisition of Yellowstone’s terrific television stations,” said Hilton Howell, Gray’s CEO and president.  “We look forward to working with the strong teams in each of these markets to enhance their leading local positions even further,” he added.

Kevin Latek, Gray’s SVP for business affairs, said: “Gray’s acquisition of Yellowstone will add three more No. 1 stations to what we believe is already the largest collection of top television stations in the industry.  As such, the transaction is consistent with Gray’s strategy of enhancing shareholder value through select acquisitions of market-leading stations that share the culture and values of our existing television stations.”

Gray funded last week’s acquisition of KJCT Grand Junction Colo., and the acquisition of the Yellowstone non-voting interest from existing cash on hand.