A Diversified $85M Buy For Gray
By Adam R Jacobson
RBR + TVBR
The long-awaited thaw for television industry transactions has arrived, and the Florida Gators and Bangor Beavers are the first to be awaken from a Spectrum Auction slumber.
In an $85 million deal announced Thursday (2/16), Diversified Communications has sold its two television stations — located in Bangor, Maine and Gainesville, Florida — to Gray Television.
Bangor is DMA No. 156 and a major regional commercial and financial center in the state; Gainesville is DMA No. 161 and home to the University of Florida’s main campus.
“This was a very difficult decision by our Board of Directors, but we feel it is the right one,” said Diversified’s Board Chair, Daniel Hildreth. “We believe that under the ownership of Gray, WCJB and WABI will have greater opportunities for long-term financial success which will ultimately benefit both our employees and viewers.”
When contacted by RBR + TVBR, a Diversified spokesperson said that the company will continue, as TV was only a segment of its total operation.
“Our television stations were our legacy products, as Diversified began as a radio station in 1949, acquiring WABI-AM in Bangor, Maine; and expanded into television broadcasting with the launch of WABI-TV in 1953,” the company representative said. “However the Hildreth family-owned company is primarily a tradeshow and conference producer, and a publisher of supporting trade publications and digital products.”
In fact, Diversified’s portfolio includes over 75 brands and the company produces over 140 events annually.
“Our operating divisions are strategically located around the world — Australia, Canada, Hong Kong, Singapore and the U.K. — to provide market access to the industries we serve,” the Diversified spokesperson notes. “Our global teams work directly with the business communities in our industry sectors to provide access, resources, services, ideas and education tailored to their unique business needs and challenges. We also continue to grow, expanding our products and services from the ground up and through acquisition or partnership with entrepreneurs, media producers and service providers.”
Thus, this sale is far from a mom-and-pop operator looking to retire.
WABI-5 was Maine’s first television station and until now has been the nation’s oldest continuously family-owned station. It has a presence in the state capital, Augusta, with a long-standing news bureau.
With Gray’s purchase of WABI, it reunites the CBS affiliate with a station Diversified previously owned that is now a Gray property — CBS affiliate WAGM-8 in Presque Isle, Maine — some 160 miles to the north, along the border with New Brunswick.
It is not yet known if Gray will combine any operations between the two stations.
Meanwhile, ABC affiliate WCJB-20 in Gainesville is known for being the first local station to have a news department. Now, it will share news “and other resources” with Gray-owned WCTV (PSIP-6) in Tallahassee — home to the University of Florida’s biggest rival, Florida State University.
“We are honored to be selected by Diversified as the new owners of legacy stations WABI and WCJB,” said Gray Chairman/CEO Hilton H. Howell Jr. “Both stations are highly valued institutions in their respective communities with dedicated employees who share our vision and culture. We look forward to building upon these strong foundations and enviable records of success.”
Gray noted that the transaction advances its strategy “of enhancing shareholder value through select acquisitions of highly rated stations that share the culture and values of our existing television stations.”
Following their acquisition by Gray, the company anticipates that the stations will produce two-year, blended broadcast cash flow margins greater than 50%. “We expect the acquisition will be immediately free cash flow accretive and allow us to continue to de-lever our balance sheet,” Gray said. “The transaction represents an attractive purchase price multiple of less than 7.0 times expected blended 2016-2017 pro forma broadcast cash flow, including expected synergies.”
Gray expects to fund the transaction through cash it has on hand and, if necessary, via funds borrowed under its existing senior credit facility.
Closing is expected in Q2 2017.
Cooley LLP served as legal counsel for Gray, while Wells Fargo Securities LLC served as financial advisor.
Sullivan & Worcester LLP served as legal counsel for Diversified Communications.
Gray shares were down slightly in early morning trading on Wall Street Thursday, to $12.45, following the company’s announcement of the two-station purchase.
RBR + TVBR