DMAS 156 & 161

Gray Buys Diversified’s 2 TVs For $85M

It adds CBS affiliate WABI Bangor, Maine, and ABC affil WCJB Gainesville, Fla., to its station portfolio. Gray says: "We expect that the stations will produce two-year, blended broadcast cash flow margins greater than 50%."

Gray Television is getting bigger. It announced today that it’s buying Diversified Communications’ two stations for $85 million: WABI (CBS/CW) Bangor, Maine (DMA 156), and WCJB (ABC/CW) Gainesville, Fla. (DMA 161).

The announcement comes just 10 days after Gray said that it reaped $90.8 million from selling spectrum in the FCC incentive auction.

Gray has been one of broadcasting’s most acquisitive station groups over the past three years. Since October 31, 2013,  it has completed 21 separate acquisition transactions and three divestiture transactions. The net has been 48 stations in 28 markets, including 23 the group had not been in before.

In addition to Diversified, it now has pending the acquisition of two stations in Clarksburg, W.Va., from Withers.

Upon the closing of these two deals, Gray will own or operate 102 stations in 56 markets. They broadcast 103 channels affiliated with the Big Four networks.

“We are honored to be selected by Diversified as the new owners of legacy stations WABI and WCJB,” said Hilton H. Howell, Jr., Gray’s chairman-CEO. “Both stations are highly valued institutions in their respective communities with dedicated employees who share our vision and culture. We look forward to building upon these strong foundations and enviable records of success.”

BRAND CONNECTIONS

“This was a very difficult decision by our board of directors, but we feel it is the right one,” said Diversified’s board chair, Daniel Hildreth. “We believe that under the ownership of Gray, WCJB and WABI will have greater opportunities for long-term financial success which will ultimately benefit both our employees and viewers.”

According to Gray, both WABI and WCJB consistently achieves No. 1 ratings in all major dayparts in its market, in both households and key demos. “Each station has also been the most-watched television station in its market throughout all of its weekday local news time slots across at least the last nine Nielsen ratings periods,” Gray said. “Each station, in fact, often has more viewership than that of all other Big Four affiliated stations in its market — combined. Finally, according to BIA data, each station has capitalized on its ratings dominance by achieving a market revenue share exceeding 50% for the past several years.”

WABI Bangor was Maine’s first television station and currently is the nation’s oldest continuously family-owned station, according to Gray. The station has long operated a news bureau covering the state capital of Augusta, which lies outside of its DMA. This transaction will reunite WABI with Gray’s station in Presque Isle, WAGM, which Diversified previously owned, “thereby facilitating further news and resource sharing between these stations,” Gray said.

WCJB Gainesville had the only local news department among all commercial stations in its market until 2010. It serves Gainesville, which is home to the University of Florida, a large top-10 ranked U.S. public university in the Southeastern Conference with an enrollment of approximately 50,000 students. Gray said: “We expect that WCJB will share news and other resources with the dominant television station to its north, Gray’s WCTV in Tallahassee.”

Gray said the deal advances its strategy of “enhancing shareholder value through select acquisitions of highly rated stations that share the culture and values of our existing television stations. Following their acquisition by Gray, we expect that the stations will produce two-year, blended broadcast cash flow margins greater than 50%. We expect the acquisition will be immediately free cash flow accretive and allow us to continue to de-lever our balance sheet.”

The transaction, Gray added, “represents an attractive purchase price multiple of less than 7.0 times expected blended 2016-17 pro forma broadcast cash flow, including expected synergies. We anticipate closing the transaction primarily through the use of cash on hand at closing and, if necessary, borrowings under our existing senior credit facility. Subject to receipt of regulatory and other approvals, we expect the transaction will close in the second quarter of 2017.”


Comments (7)

Leave a Reply

Gabby Fredrick says:

February 16, 2017 at 10:15 am

So we are supposed to believe these 2 stations combined have cash flows of 12 million $$ in the 156 and 162nd markets…No way….Gray will do what they always do ..go in ..cut jobs and salaries to try to save $$ but no way these stations are worth this price…They overpaid…Again!!!! The top line..top line growth is what matters in evaluating properties..anyone can cut expenses..

    Wagner Pereira says:

    February 16, 2017 at 4:05 pm

    I am 100% sure Gray has looked closely at the books and has justification for the price, unlike you.

    Casey Cotton says:

    February 16, 2017 at 4:40 pm

    “cut jobs and salaries to try to save $$” ? Not the Gray Television I know.

    Debra Rein says:

    February 16, 2017 at 4:56 pm

    I have a station in market range 150-165 that does 7 to 8 million in cash flow. These two stations are total market dominators. Not sure why you think 12 million for two very strong market leaders is unrealistic.

    Wagner Pereira says:

    February 16, 2017 at 7:30 pm

    @martelxo92 Because @Prescient is clueless

    Andrea Rader says:

    February 16, 2017 at 7:45 pm

    It’s certainly the Gray Television ex-WDBJ employees know.

Patrick Burns says:

February 16, 2017 at 10:26 am

Bangor is a nice mkt but one of the most unusual I ever examined. Not sure now , but in 2001 time span, Radio out billed the TV facilities based on BIA & others !!!. All the TVs were slaved to their big sisters in Portland. Gray overpaid for sure & the Bangor economy chugs along but is not a bran burner. Oh I forget the Bangor Daily News is a powerhouse.
We will see if they was smart !!


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