Meredith Prepared To Buy More Stations

Add Meredith to the list of potential broadcast consolidators.

Stephen Lacy, Meredith’s CEO, said the company is open to acquisition opportunities but indicated it’s unlikely to get into a bidding war with peers.

“It’s a frothy [M&A] market,” Lacy said during this morning’s conference call with investors. “We would like to add to stations but we want to make sure it adds to shareholder value.”

Earlier this year, Lacy expressed interest in the Local TV/FoxCo group in a newspaper interview. But if Meredith was among the bidders, it was no match for Tribune.

Tribune won the race for the group with a $2.73 billion offer — the highest price paid so far in the current round of broadcast M&A.

Like other multimedia ownership groups, Meredith faces challenges as it seeks to maintain strong margins, cash flow growth and investor value while dealing with declines on the print side.

The company appears to have found at least a temporary formula by growing digital distribution of its print titles, even adding new titles, and selling advertisers on the value of print exposure.

But as costs for newsprint, ink and distribution continue to rise, the broadcast business looks ever more attractive.

Meredith’s National Media Group, which includes its print titles, saw revenues increase 3% for the fiscal year 2013 ended June 30. Its Local Media Group, which includes its television stations, saw revenues increase 20%.

“There are larger-scale opportunities that may present themselves downstream,” Lacy said. “There are four or five places where we think there are some tuck-in possiblities. There have been some high-visibility group sales. But in an auction environment, it’s always a little tougher.”

There are persistent rumors that Meredith and LIN have been talking, but the rumors, if valid, so far have not yielded actual news.

Meredith’s debt-to-EBITDA leverage ratio currently is 1.3 times with the company reporting only about $350 million in total debt.

Joe Ceryanec, Meredith’s vice president-CFO, said Meredith would go as high as a 3-times leverage ratio for the right acquisitions but is unwilling to operate the business long-term at more than a 2.5-times ratio.

On another front, Meredith projects retrans revenues in fiscal 2014 will grow to about $50 million, a roughly 50% increase over the just completed fiscal year. At the same time, costs in the form of reverse compensation to networks are increasing, approaching the 50-50 split of retrans that the networks are seeking.