Gray’s American Spirit As July 4 Nears: A SSA Conversion

For more than a decade, Gray Media and, before that, the former Raycom Media, has provided back-office services to five television stations licensed to a company founded in 2003 by Thomas B. Henson. Gray (and predecessor Raycom) also produced local newscasts for four of the licensee’s stations.

Now, Gray Media has agreed to convert its shared services agreements with American Spirit Media by agreeing to a six-station transaction valued at $50 milion.

“Going forward in each of these markets, we expect to leverage our news, sales, and sports strategies for the benefit of the local communities and the public interest,” Gray said in a statement released on Wednesday morning ahead of a Form 314 filing with the FCC for its regulatory approval.

The deal involves the following stations:

Terms of the SSA-to-ownership plan were shared by Gray. First, the company led by Gray CEO and board chairman Hilton Howell Jr. and President/co-CEO Pat LaPlatney paid $40 million to American Spirit. That triggered the commencement of a limited local management agreement for all six stations.

Gray funded the $40 million payment with a segment of its proceeds from a private placement of $70 million of aggregate principal amount of Gray’s 7.250% Senior Secured First Lien Notes due 2033, which was completed yesterday (6/30).

The final $10 million owed to American Spirit will be paid with cash on hand, Gray says, and expects to do so before the end of the year once it gets FCC approval.

“Consistent with each of Gray’s other television station transactions announced over the past 12 months, the American Spirit transaction furthers our commitment to pursuing prudent tuck-in acquisitions that strengthen our local presence and expand our scale, including establishing two-station footprints in attractive markets,” Gray said.

In Toledo, WUPW-TV will be paired with WTVG-13, Gray’s ABC affiliate. In Jackson, Miss., WDBD will become a sibling to NBC affiliate WLBT-TV; while WSFX-TV will now be in a duopoly with NBC affiliate WECT-TV (and low-power Telemundo affiliate WTWL-LD).

In Columbus, Ga., WXTX is poised to become a sibling to WTVM-9, the ABC affiliate, and Telemundo-aligned WCTA-LD. Then, there is Lake Charles, where Gray’s NBC affiliated KPLC-7 will be linked to KVHP-TV by family ties.

The Wichita Falls scenario sees CBS affiliate KAUZ-TV becoming a sibling to ABC affiliate KSWO-TV in Lawton, Okla.; the two cities share the same DMA.

Gray anticipates that the acquisition, together with a debt issuance and preferred stock redemption that Gray announced concurrently, will be cash flow accretive, will not increase its consolidated total net leverage ratio and support the publicly traded company’s ongoing efforts to improve its balance sheet.

For Henson, the deal will conclude 23 years of station ownership — something that was directly tied to Raycom’s acquisition of Waitt Media television stations. As ownership limits prevented Raycom from owning all of the properties, Henson formed a company with the intent of allowing Raycom to handle certain services — permissible under FCC regulatory policy.

Henson started his career as an attorney with Robinson Bradshaw & Hinson, P.A., where he was based from 1980-1999. There, he specialized in mergers and acquisitions. Henson is also a founding director of Park Sterling Corporation, a publicly traded bank with $3.5 billion in assets and operations in four states sold in 2017 to South State Corporation (SSB) in 2017. Henson has also enjoyed a career as a real estate, hospitality and leisure industries investor.