ATLANTA: Gray Television Inc. has agreed to acquire all outstanding shares of Meredith Corporation for approximately $14.50 per share in cash, or $2.7 billion in total enterprise value after the spinoff of Meredith’s National Media Group to the current Meredith shareholders, a news release said.
The parties expect to close the transaction in the fourth quarter of 2021.
Immediately prior to closing this acquisition, Meredith will spin off to its existing shareholders its National Media Group operating division, which owns the nation’s largest portfolio of magazines as well as digital and marketing assets.
At the closing, Gray will acquire Meredith’s other operating division, known as the Local Media Group, which owns 17 television stations in 12 local markets.
To facilitate regulatory approvals for this transaction, Gray will divest its ABC affiliate in the market, WJRT-TV, to an independent third-party no later than the closing of the Meredith acquisition.
With a combined net revenue exceeding $3.1 billion on a blended 2019/2020 basis, Gray’s acquisition of Meredith’s television stations will transform Gray into the nation’s second largest television broadcaster.
Gray’s portfolio of television stations, including all announced transactions and less divestitures, will serve 113 local markets reaching approximately 36 percent of US television households.
The transaction augments Gray’s position as the largest owner of top-rated local television stations and digital assets in the United States, with a pro forma portfolio including 79 markets with the top-rated television station and 101 markets with the first and/or second highest rated television station according to Comscore’s audience measurement data.
Gray’s Executive Chairman and CEO Hilton H. Howell commented, “The television station portfolios, company cultures, and commitments to localism of Gray and Meredith are highly complementary. We are very excited to acquire Meredith’s excellent television stations, and we look forward to welcoming its employees into the Gray family. Moreover, Gray’s Board and shareholders are deeply appreciative of the tireless efforts of our team led by Kevin Latek and Jim Ryan on this transaction and our other recently announced significant transactions. Building on our successes throughout 2020 and just the first few months of 2021, Gray Television clearly has an even stronger and brighter future than ever!”
Gray expects that the Meredith transaction will be significantly accretive to free cash flow per share. To date, Gray has identified an estimated $55 million in synergies annualized for the first full calendar year following the closing. Including these anticipated $55 million of synergies, the purchase price for Gray’s acquisition of Meredith represents a multiple of approximately 7.9 times a blended average of the Meredith television stations’ 2019/2020 operating cash flow.
Wells Fargo has underwritten the debt financing portion of the transaction. Expected strong free cash flow generation through the closing of all pending transactions and throughout 2021 and 2022 is anticipated to allow Gray to deleverage its capital structure following the closing.
Assuming a year-end 2021 closing, Gray anticipates that its total leverage ratio, net of all cash, would approximate 5.3 times on a trailing eight-quarter operating cash flow, including estimated annualized synergies from all announced transactions.
The transaction has been approved by the Boards of Directors of both Gray and Meredith. No Gray shareholder vote will be required to consummate the transactions described herein. Completion of the transaction is subject to approval by Meredith’s shareholders. Meredith’s significant shareholders have entered into agreements with Gray to support the transaction.
Wells Fargo Securities LLC served as financial advisor and Eversheds Sutherland LLP and Jones Day served as legal counsel for Gray.
Gray Television is a television broadcast company headquartered in Atlanta, Georgia. Gray is the largest owner of top-rated local television stations and digital assets in the United States (U.S.).
Gray currently owns and/or operates television stations and leading digital properties in 94 television markets that collectively reach approximately 24% of U.S. television households. During 2020, Gray’s stations were ranked first in 70 markets, and ranked first and/or second in 86 markets, as calculated by Comscore’s audience measurement service. Gray also owns video program production, marketing, and digital businesses including Raycom Sports, Tupelo Honey, and RTM Studios, the producer of PowerNation programs and content, and is the majority owner of Swirl Films.