Media General Acquiring Meredith For $2.4B

Media General is acquiring Meredith Corp. for approximately $2.4 billion, creating another TV station mega-group with stations in 54 markets and a footprint covering some 30% of TV homes.

Meredith Media General, as the new company will be named following the merger, would be TV broadcasting’s fourth largest, according to the TVNewsCheck/BIA Top 30 ranking based on spot revenue. Only Fox, CBS and Sinclair would rank higher.

Under the terms of the agreement, which was announced early this morning, Meredith shareholders will receive cash and stock valued at $51.53 per share, which represents a 12% premium to Meredith’s closing stock price on Sept. 4.

The transaction, which is subject to government approval, is expected to close by June 30, 2016.

Although Media General is the acquiring company and Media General CEO Vince Sadusky led off the conference call with analysts this morning, the companies said current Meredith CEO Stephen Lacy will lead Meredith Media General as CEO and president. There is no word on what, if any, role Sadusky will have going forward.

The Meredith Media General’s senior management team will be a combination of the two existing executive teams, the companies said. The company will maintain corporate and executive offices in Des Moines, Iowa, where Meredith is now based, and Richmond, Va., where Media General is now based.

Upon closing, the board will comprise 12 directors, eight appointed by Media General and four by Meredith. J. Stewart Bryan III, current Media General chairman, will be chairman of Meredith Media General. Sadusky sits on thecurrent Media General board.

Media General shareholders will receive one share of the new holding company for each share of Media General they own upon closing.

Meredith shareholders will receive $34.57 in cash and 1.5214 shares of the new holding company for each share of Meredith they own upon closing.Common Stock and Class B Common Stock, will receive the same consideration per share.

Upon closing, Media General shareholders will own approximately 65% and Meredith shareholders will own approximately 35% of the new Meredith Media General.

The new company’s financial profile includes:

• Pro-forma annual revenues of $3 billion and EBITDA of over $900 million.

• More than $80 million of total synergies expected within the first two years with $60 million of run-rate synergies expected in the first 12 months of operations post-closing.

• Expected pro forma net leverage at closing of less than 5.5x, based on 2014/2015 average pro forma adjusted EBITDA, as per Media General’s credit agreement.

More details on the deal are contained in the slides used during this morning call with securities analysts.

Media General Chairman J. Stewart Bryan III said: “This merger creates greater opportunities for profitable growth than either company could achieve on its own. Importantly, shareholders of both companies will benefit from the upside potential of a diversified and strategically well-positioned media company with a strong financial profile and the ability to generate significant free cash flow.”

Meredith CEO Steve Lacy said: “We are excited about the opportunity to create a powerful new multiplatform and diversified media company with significant operations on the local and national levels. This merger will create a strong and efficient company positioned to realize the significant earnings and cash flow potential of local broadcasting; leverage the unparalleled reach and rich content-creation capabilities of Meredith’s national brands; and capture the rapidly developing growth potential of the digital media space. It also positions Meredith Media General to deliver enhanced shareholder value and participate in future industry consolidation.”

Meredith Media General’s portfolio will include:

• 88 TV stations across 54 markets that reach 30% — or approximately 34 million — U.S. TV households. It will include 40 Big Four network-affiliated TV stations located in the top 75 DMAs. Stations in six markets will be swapped or otherwise divested in order to address regulatory considerations. These markets are: Portland, Ore (DMA 23): KOIN (CBS) MG, KPTV (Fox) Meredith, KPDX (MNT) Meredith; Nashville (DMA 29): WKRN (ABC) MG, WSMV (NBC) Meredith; Hartford, Conn. (DMA 30): WCTX (MNT) MG, WTNH (ABC) MG,WFSB (CBS) Meredith; Greenville-Spartanburg, SC-Asheville, NC (DMA 37): WSPA (CBS) MG, WYCW (CW) MG, WHNS (Fox) Meredith; Mobile, Ala.-Pensacola, Fla. (DMA 59): WKRG (CBS) MG, WFNA (CW) MG, WALA (Fox) Meredith; Springfield-Holyoke, Mass. (DMA 115): WWLP (NBC) MG, WFXQ-CD (NBC) MG, WGGB (ABC) Meredith, WSHM-LD (CBS) Meredith

• Leading multiplatform national media brands with a top female reach of 100 million unduplicated American women and over 60% of U.S. millennial women. These category leading brands include Better Homes and Gardens, Allrecipes, Parents and Shape.

• A powerful digital platform reaching over 200 million monthly unique visitors via a combination of leading national and local consumer sites and business-to-business digital capabilities in key growth sectors such as content, mobile, social, video and native advertising. Digital revenues are expected to exceed $500 million in the first full year of operations post closing.

• Diverse revenue streams including a top 3 global brand licensing program and leading marketing services agencies.

To the extent that the company is able to successfully execute swaps, as opposed to outright sales, it said it will further enhance the combined company’s size and scale.

Moelis & Co. has been retained to manage the process of divesting stations in overlapping markets to facilitate regulatory approval.