Investors cheer Gannett's $2.2B Belo buyout - The Deal Pipeline (SAMPLE CONTENT: NEED AN ID?)
Subscriber Content Preview | Request a free trialSearch  

Telecom, Media & Technology

Print  |  Share  |  Reprint

Investors cheer Gannett's $2.2B Belo buyout

by Chris Nolter  |  Published June 14, 2013 at 9:40 AM
Even though Gannett Co. agreed to a hefty premium in its $2.2 billion bid for Belo Corp., shares of the newspaper and TV company jumped more than 33% on Thursday.

Gannett is paying $13.75 per share in cash, more than 28% above Belo's Wednesday close. Shares of Gannett rose $6.77, or more than 34%, to $26.62. Belo gained $3.04, to close at $13.77, just exceeding the offer.

The total equity payout comes to $1.5 billion. Including $715 million in debt, the total deal value comes to 9.4 times blended 2011-2012 Ebitda, not counting savings or other benefits the deal might carry.

Belo attained the sale price without an auction.

"We did not set out to sell the company," Belo CEO Dunia Shive said during a Thursday investor call.

Shive explained that she had spoken with Gannett CEO Gracia Martore "over the years" about ways to build a large portfolio of media assets. "Conceptually, Dunia and I have talked for a long time about what we perceived to be the value of a supergroup," Martore said.

A combined Gannett-Belo would have 43 TV stations and generate nearly $1.5 billion in Ebitda against $6.1 billion in revenue. It would have the fourth-largest portfolio of stations affiliated with the Big Four networks, after CBS Corp., News Corp.'s Fox and acquisitive station group Sinclair Broadcast Group Inc.

Mark Fratrik of BIA/Kelsey said a merged Gannett-Belo would be the third-largest local TV station group in terms of revenue, behind only CBS and Fox.

"It is a good sign for the future of local TV broadcasting," Fratrik said. "Large companies with financing are making investments, and local TV will remain an important part of the local advertising marketplace."

Martore did not convey the sense that Gannett is poised for an acquisition binge.

"We've looked at a lot of TV opportunities," she said, adding that Belo stood out because it would complement Gannett's own holdings.

Martore touted the benefits of scale in negotiating the fees that cable groups pay to retransmit their signals. Including savings and other synergies, she said, the payout would come to 5.4 times Ebitda.

Gannett has developed digital properties that would benefit Belo's properties. The company expects leverage of 2.3 times Ebitda following the deal.

Yet, Martore did not foreclose the possibility of more deals. When asked if Gannett's leverage targets would preclude more acquisitions, she said, "No, absolutely not."

Groups like Nexstar Broadcasting Group Inc. and Sinclair have been acquisitive on a smaller scale. Media General Inc. is combining with New Young Broadcasting Holding Co.

Gannett's bid triggered a rally in TV shares. Nexstar Broadcasting gained $2.22 per share on Thursday afternoon, climbing more than 8%, to $29.41. Sinclair rose $3.14, or 13%, to $27.23. Lin TV Corp. increased by $1.63, more than 14%, to $13.18. Gray Television Inc. was up 80 cents, or nearly 15%, to $6.24.

Martore emphasized the benefits of combining the two TV groups.

Marci Ryvicker of Wells Fargo Securities LLC wrote in a Thursday report that Gannett's payout metric implies a valuations of $50 for Nexstar, $35 for Sinclair, $26 for Lin and $7 for Gray.

The companies expect to close the deal by the end of 2013. The transaction carries a 3.5% breakup fee.

Tags: Belo | BIA/Kelsey | CBS | Dunia Shive | Fox | Gannett | Gracia Martore | Gray Television | Lin TV | Media General | New Young Broadcasting | News Corp | Nexstar Broadcasting Group | Sinclair Broadcast Group | Wells Fargo Securities

Meet the journalists

Chris Nolter

Senior Writer: Media & Telecom

Movers & Shakers

Launch Movers and shakers slideshow

French mergers and acquisitions lawyer Laurent Faugerolas joined Dechert LLP. For other updates launch today's Movers & shakers slideshow.


Struggling TeleCommunication Systems is sold

After announcing in July that it was exploring strategic alternatives, TeleCommunication Systems Inc. has agreed to sell to Comtech Telecommunications Corp. in a transaction with an enterprise value of $430.8 million. More video