TV Deal: Gannett, Belo To Merge

Gannett Co., Inc. and Belo Corp. jointly announced today that they have entered into a definitive merger agreement under which Gannett will acquire all outstanding shares of Belo for $13.75 per share in cash, or approximately $1.5 billion, plus the assumption of $715 million in existing debt for an enterprise value of approximately $2.2 billion. The transaction, which has been unanimously approved by the boards of directors of both companies, represents a 28.1 percent premium to the closing price of Belo common stock on June 12, 2013.

The combination creates a broadcast “Super Group,” catapulting Gannett into the nation’s fourth-largest owner of major network affiliates reaching nearly a third of all U.S. households.

The acquisition nearly doubles Gannett’s current broadcast portfolio from 23 to 43 stations, including stations to be serviced by Gannett through shared services or similar sharing arrangements.

Upon completion of the transaction, Gannett’s Broadcast segment will have greater geographic and revenue diversity, with 21 stations in the top 25 markets and will become the #1 CBS affiliate group, the #4 ABC affiliate group, and will expand its already #1 NBC affiliate group position.

Following the transaction, Gannett’s Broadcast segment is expected to contribute more than half of the Company’s pro forma total EBITDA, and the Digital and Broadcast segments combined are expected to contribute nearly two-thirds.

The Company anticipates that the transaction will generate approximately $175 million in annual run-rate synergies within three years after closing. The transaction is expected to generate significant free cash flow and be accretive to non-GAAP earnings per share by approximately $0.50 within the first 12 months. The transaction valuation implies a 9.4x average 2011/2012 EBITDA multiple prior to synergies, and a 5.4x multiple assuming expected synergies.