Gray Television Sells Some, Buys Some

Gray Television announced today that it has reached agreements to sell or swap TV stations in three markets to comply with FCC rules regarding its recently announced purchase of the television and radio stations owned by Schurz Communications.

Gray also announced the acquisition of three additional TV stations that will result in Gray operating in one additional market. Upon the closing of all previously announced transactions, Gray will own and/or operate network affiliates in 50 markets across the U.S.

In Wichita, Kan. (DMA 65), Schurz owns CBS affiliate KWCH and Gray owns ABC affiliate KAKE. Gray previously announced its intention to acquire KWCH and sell KAKE.

Gray has now reached an agreement with Lockwood Broadcast Group to sell it KAKE in exchange for Lockwood’s WBXX and $11.2 million in cash. WBXX is the CW affiliate in Knoxville, Tenn. (DMA 62), where Gray owns CBS affiliate WVLT. This swap will give Gray a second station in its largest market, and the cash component will slightly lower the effective purchase price for the Schurz acquisition, Gray said.

Gray and Lockwood will not enter into any form of shared services agreement, meaning that KAKE will be owned and operated completely independently from Gray following the closing of this transaction. Gray said the implied pro forma broadcast cash flows of KAKE and WBXX (after including the cash component) are approximately equivalent. The parties structured the transaction as a like-kind exchange for tax purposes.

Hilton H. Howell Jr., Gray’s president-CEO, explained: “Our decision to sell KAKE-TV resulted from our conclusion that we are not in the best position to be long-term stewards of KAKE-TV despite its impressive recent competitive inroads. We will watch with admiration as the station builds on its recent improvements under Lockwood. KAKE-TV has great employees, and we know they will continue to succeed in the future. At the same time, we are delighted to have reached an agreement with Lockwood that allows us to deepen our investment and expand our opportunities in Knoxville through the acquisition of WBXX/CW20.”

In South Bend, Ind. (DMA 96), Schurz owns CBS affiliate WSBT and Gray owns NBC affiliate WNDU. Gray previously announced its intention to retain WNDU and divest WSBT. Gray has now reached agreements with Sinclair Broadcast Group to swap WSBT in exchange for Sinclair’s WLUC Marquette, Mich. (DMA 180), whose channels serve as the NBC and Fox affiliates for the market. Gray and Sinclair will not enter into any form of shared services agreement. The broadcast cash flow of WSBT and pro forma broadcast cash flow of WLUC are approximately equivalent, Gray says. 

In Rapid City, S.D. (DMA 171), Schurz owns ABC affiliate KOTA and Gray owns Fox affiliate KEVN. Gray will sell Legacy Broadcasting all of KOTA’s assets, including FCC licenses, real estate, programming agreements and retransmission consent agreements, but will keep the ABC affiliation, which it will move to KEVN at closing. The sales price for this transaction is $1. Gray and Legacy will not have any shared services agreement, so Legacy will own and operate KOTA-TV’s MeTV and ThisTV channels independently from Gray following closing. 

In addition, in Anchorage, Alaska (DMA 148), Gray previously announced that it will buy from Schurz the market’s NBC affiliate, KTUU. Recently, Gray reached an agreement with Fireweed Communications  to acquire KYES, the market’s MNT affiliate, for $500,000. Gray will apply to the FCC for a “failing station” waiver of the local ownership rules to permit the combination of KTUU and KYES, which Gray says “we believe will permit us to improve the programming and services offered by both stations.”

Gray anticipates closing all these transactions in the fourth quarter of 2015 or first quarter of 2016. The transactions with Sinclair and Legacy will close simultaneously with the Gray/Schurz transaction. Wells Fargo Securities served as financial adviser to Gray on the Wichita and South Bend transactions.  Cooley LLP served as primary legal counsel for Gray on all of the transactions announced today.