Media General, the US television station owner, has agreed to buy Meredith, the publisher of Better Homes and Gardens, for $3.1bn including debt in a deal that bucks the trend of media companies splitting their print operations from faster-growing broadcast businesses.
The $2.4bn cash and stock offer values Meredith at $51.53 a share, a 12 per cent premium to Meredith’s closing price on Friday. Media General will also take on Meredith’s net debt of $772m, giving the deal an enterprise value of $3.1bn. Media General shareholders will own about 65 per cent of the new company and Meredith investors about 35 per cent.
While Meredith is best known for its female-focused magazine titles such as Martha Stewart Living and Family Circle, Media General’s interest is focused on the company’s 17 local TV stations, which include big markets like Atlanta and Phoenix.
The combined company, to be named Meredith Media General, will operate 88 stations across 54 markets, reaching 30 per cent of US TV households and making it the country’s third-largest local TV operator. It will have about $3bn in revenues and an expected $80m in synergies within the first two years.
“This merger will create a strong and efficient company positioned to realise 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,” said Steve Lacy, Meredith chief executive, who will take on the same position at the new company.
He added that the deal “also positions Meredith Media General to deliver enhanced shareholder value and participate in future industry consolidation.”
Meredith has been seen by analysts and industry executives as a potential buyer for Time Inc, the publishing division spun off by Time Warner last year, which has struggled as a standalone publisher, weighed by $1.4bn in debt. Other media owners including Gannett, Tribune Media and News Corp have similarly split their print and broadcast businesses.
The transaction has been approved by Media General’s and Meredith’s boards and is subject to approval of shareholders and regulators. The companies expect to close the deal by June 2016.
Media General has secured $2.8bn in financing commitments from RBC Capital Markets and JPMorgan. RBC advised Media General and Fried, Frank, Harris, Shriver & Jacobson gave legal advice Meredith was advised by BDT & Company and Moelis with legal advice from McDermott Will & Emery and Cooley.
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