On Thursday (4/29), rumors became reality as Allen Media Broadcasting, the fast-growing television company owned by Byron Allen, emerged as the buyer of 10 television stations Gray Television agreed to sell in order to receive regulatory approval of its $925 million merger with Quincy Media, Inc.
While the end of the Ralph Oakley-led QMI is certainly noteworthy and will reshape Gray even further, following the January 2019 completion of its mega-merger with Raycom Media, Gray’s latest “transformative” transaction is a blockbuster in the making.
Gray 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. Importantly, this will occur following the spin-off of Meredith’s National Media Group to current Meredith shareholders.
Meredith and Gray expect to complete the $2.7 billion deal in Q4.
The transaction has been approved by the Boards of Directors of both Gray and Meredith.
When complete, Meredith’s National Media Group will continue as an entity steeped in female-focused lifestyle brands that have evolved from glossy magazines to digitally delivered written and video features, with such titles as Entertainment Weekly, SHAPE, Travel + Leisure InStyle, and PEOPLE alongside the venerable Better Homes & Gardens.
To be clear, Gray isn’t gaining those assets. Following the transaction, Meredith is expected to organize under two reporting segments, Digital and Magazine. It will remain based in Iowa’s biggest city and its “existing senior executive team” will continue to lead Meredith Corp. with Tom Harty as Chairman/CEO and Jason Frierott as CFO.
What Gray is getting are 17 television stations in 12 DMAs, many of them top performers.
Atlanta: 
Phoenix: 
Portland, Ore.:
St: Louis:
Nashville: 
Hartford-New Haven:
Kansas City:
Greenville-Spartanburg:
Las Vegas:
Mobile:
Flint-Saginaw, Mich.:
Springfield, Mass.:
A NEED FOR A SINGLE SPIN
For Gray, the Meredith acquisitions fit like a glove. Gray presently operates in only one of these television markets: Flint-Saginaw.
It’s going to keep WNEM, a market leader for several years, and part ways with its current property in the DMA.
To facilitate regulatory approvals for this transaction, Gray will divest ABC affiliate WJRT-12 “to an independent third-party no later than the closing of the Meredith acquisition.”
Could it be Allen Media? In announcing the agreement to purchase Gray’s QMI spins, Byron Allen said, “We plan to invest approximately $10 billion to acquire more ABC, CBS, NBC, and FOX television stations over the next two years with the goal of being the largest broadcast television group in America.”
THE NEW TV NUMBER TWO
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 says.
Once the transaction is complete, Gray’s portfolio of television stations, including all announced transactions and less divestitures, will serve 113 local markets, reaching approximately 36% of U.S. television households.
Importantly, it gives Gray entry into such growing markets as Atlanta and Phoenix, where it will compete against TEGNA — another company eyed as a M&A target for more than a year by industry analysts and observers.
Speaking of how well the Meredith Local Media stations mesh with Gray’s assets, Executive Chairman and CEO Hilton H. Howell said, “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.”
Howell also singled out Gray CFO Jim Ryan and Chief Legal & Development Officer Kevin Latek for leading “the tireless efforts of our team” on this transaction and its other recently announced “significant transactions.”
‘A GREAT STRATEGIC FIT’
In prepared comments, Meredith Corp. Chairman/CEO Harty said of the sale of its Local Media Group, “The scale made possible by the combination of the Local Media Group with Gray Television represents a great strategic fit, and we are incredibly grateful to our colleagues for their years of dedicated service and industry-leading work. Our broadcast stations have been an important piece of Meredith’s history for nearly 75 years and have become integral to the communities they serve, providing outstanding coverage, local insight, and strong advertiser partnerships.”
Transaction Summary
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, it says.
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, Gray notes.
The transaction is subject to customary closing conditions and regulatory approvals, including certain consents necessary to effectuate the spin-off of Meredith’s National Media Group immediately prior to the closing of Gray’s acquisition of Meredith.
Giving effect to the FCC’s UHF Discount, the pro forma portfolio of television stations will reach approximately 25% of domestic television households, “which is well below the FCC’s national audience cap of 39%,” Gray points out.
Wells Fargo has underwritten the debt financing portion of the transaction.
For Meredith Corp., Moelis & Company acted as financial advisor and Cooley LLP acted as legal advisor. Additionally, BDT & Company served as financial co-advisor and Lazard served as a strategic advisor.
“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,” Gray notes. “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.”
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.
