By Chelsey Dulaney And Jeffrey A. Trachtenberg
Media General Inc. on Tuesday said it agreed to buy Meredith
Corp. for about $2.4 billion in cash and stock, continuing a trend
of consolidation in the broadcast industry as local TV stations
look for negotiating leverage against large cable and satellite
providers.
The offer of $51.53 a share is a 12% premium to Meredith's
closing price on Friday. Including debt, the deal is valued at $3.1
billion.
Meredith, which began as an agricultural publisher in 1902, is
known for magazines such as Better Homes & Gardens and Family
Circle. But its 17 local TV stations are the centerpiece of the
deal.
The combined company, which will be called Meredith Media
General, will comprise 88 stations that reach 30% of U.S.
households, or 34 million homes.
"This deal creates a powerful, multi-platform and highly
diversified media company and it builds a platform for continued
industry consolidation," Meredith Chief Executive Stephen Lacy said
in a conference call with analysts.
The deal, which must be approved by both companies' shareholders
and the Federal Communications Commission, is expected to close
next June. The companies will swap or divest assets in six markets
to address regulatory concerns.
Lance Vitanza, an analyst at CRT Capital Group, said the deal
made sense as it has become increasingly difficult for smaller
broadcasters to thrive amid consolidation between their
distribution partners.
"You're seeing AT&T buying DirecTV, and Charter in the
process of buying Time Warner Cable," he said. "The TV guys have to
follow suit if they are going to survive."
Carriage payments--also known as "retransmission consent"
fees--have been a key source of growth for stations, complementing
the television-advertising business, which can be volatile and
spikes in election years. In the latest example of how disputes
with pay-TV providers can flare up, the signals of TV station giant
Sinclair Broadcast Group went dark on Dish Network Corp. briefly
last month until the two sides reached a truce at the behest of the
FCC.
Broadcasters are facing new uncertainty in Washington over
proposed rules that might weaken their hand in pay-TV negotiations,
and a pending rule-making on how they will be treated in new
streaming TV packages.
Media General operates or services 71 television stations. After
selling the bulk of its newspaper holdings to a subsidiary of
Berkshire Hathaway Inc. a few years ago, the company has bulked up
through deals, including its purchase of LIN Media LLC last year
and New Young Broadcasting in 2013.
Together, Media General and Meredith will have a diverse
network, with 29 of their stations affiliated with CBS, 15 with
NBC, 14 with Fox, 13 with ABC and 11 with the CW.
The deal could have implications for magazine publisher Time
Inc., which was long seen as a potential merger partner for
Meredith. Time Warner Inc. decided in 2013 to spin off Time Inc.
after talks to merge most of their titles fell apart. Time Inc. and
Meredith have had no recent discussions, according to a person
familiar with the matter.
Wells Fargo analyst Marci Ryvicker said in a research note it
was possible Media General would choose to spin off its magazine
assets in the future.
On the call, executives for both Meredith and Media General said
they continued to view the magazine titles as a key driver of
content creation for their digital properties, which have a strong
audience among women and power a promising digital ad business. "We
are forecasting $500 million in revenue annually from these digital
offerings," Mr. Lacy said.
Overall, the combined company will have about $3 billion in
annual revenue and a workforce of around 9,000 people.
Shares of Media General slid about 33% this year through
Friday's close, giving the company a market value of about $1.4
billion compared with Meredith's $2.1 billion value. Media General
shares were down slightly in late-morning trading Tuesday to
$11.07, while Meredith shares were at $50.35.
Media General shareholders will own about 65% of the new
company, while Meredith shareholders will own about 35%. Mr. Lacy,
will lead the company as chief executive.
The companies said they expect $80 million in synergies within
the first two years.
The consolidation move comes as many media companies are
splitting their broadcast businesses from their print operations.
In June, Gannett Co. completed the spinoff of its broadcasting and
digital-media business, now called Tegna Inc. That followed similar
moves by Tribune Media Co. and News Corp, publisher of The Wall
Street Journal.
Lukas I. Alpert contributed to this article.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com and Jeffrey
Trachtenberg at Jeffrey.Trachtenberg@wsj.com
(END) Dow Jones Newswires
September 08, 2015 12:41 ET (16:41 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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