A successful bid by Atlanta-based Gray would significantly expand its footprint in several TV markets. It underscores the pressure Gray and other companies in the TV station industry are under to gain scale and pricing power with advertisers and the major networks.
While the sector is benefiting from increased political advertising this year ahead of the U.S. presidential election in November, TV advertising budgets have been in decline as media consumption shifts to the internet and online streaming.
Gray, which has a market capitalization of $1.5 billion, has offered about $20 per share in cash and stock for Tegna, two of the sources said. The acquisition financing would add to Gray’s $3.8 billion debt pile, but the company has a plan to quickly pay down debt should the deal be completed, one of the sources added.
After Reuters reported on Gray’s bid on Friday, private equity firm Apollo Global Management Inc (APO.N) informed Tegna it was also prepared to offer $20 per share to buy the company, but its bid would be all-cash, the sources said.
Apollo made a big bet on the sector last year, acquiring the TV and radio stations of Cox Enterprises Inc for more than $3 billion, including debt.
There is no certainty that Tegna, which has a market capitalization of $3.7 billion and outstanding debt of $4.2 billion, will accept either offer, or that it will successfully negotiate a deal, the sources said. A deal with Gray or Apollo would require divestitures, according to the sources.
The sources asked not to be identified because the matter is confidential. Virginia-based Tegna declined to comment.
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