Gannett Building a Media Powerhouse with $2.2 Billion Acquisition of Belo Corp.

Andrew Klips |

GannettUSA Today owner Gannett Co., Inc. (GCI) reported Thursday morning that it has agreed to terms to acquire television station owner Belo Corp. (BLC) in a deal with an enterprise value of about $2.2 billion as it expands into a diversified multi-media company. The merged company will position Gannett as the fourth largest owner of major network affiliates, reaching nearly one-third of all U.S. households, including 21 of the 25 biggest markets in the country.

Belo owns and operates 20 televisions stations and associated websites, including affiliations with ABC, CBS, NBC, FOX and CW in major markets. The company’s stations rank first or second in almost all of their local markets. With the acquisition, Gannett will nearly double their broadcast portfolio from 23 to 43 stations.

Gannett is already the largest newspaper owner in the U.S. With its network of properties, the company reaches more than 100 million people every month.

Per the definitive merger agreement, McLean, Virginia-based Gannett will acquire all of the issued and outstanding shares of Belo for $13.75 per share – a 28 percent premium to Belo’s closing price on Wednesday – and assume $715 million in Belo’s existing debt. The boards of both companies have approved the merger, which is anticipated to close by the end of the year.

Gannett said it expects the transaction to generate significant free cash flow and be accretive to non-GAAP earnings per share by approximately $0.50 within the first 12 months.

Even with the extra financial burden of the Belo acquisition, Gannett intends to continue its share buyback program, replacing its existing remaining authorization with a new $300 million authorization for the next two years. The existing dividend payment plan will be continued as well.

“By enhancing our portfolio with one of the largest, most geographically diverse and network-balanced TV station groups in the country, the new Gannett will be well positioned to lead innovation, bolster our existing growth initiatives and take advantage of new opportunities in the emerging digital media landscape,” said Gracia Martore, president and chief executive of Gannett.

Calling the transaction an “outstanding and financially compelling transaction” for Belo shareholders, Belo president and CEO Dunia Shive added, “Together, this portfolio of media assets will be well-positioned to capitalize on substantial growth opportunities in the years ahead.”

Shares of both GCI and BELO roared ahead Thursday morning with the news to continue strong runs over the past year. Shares of GCI climbed about 25 percent to about $25 each, marking their highest level in five years. Shares have risen 42 percent so far in 2013 with the move. BELO shares skipped upward to near the buy-out price, representing the highest level of the stock since February 2008. In 2013, shares are ahead more than 80 percent with today’s news.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
CBS CBS Corporation Class B 62.56 -1.02 -1.60 5,665,904
TWX Time Warner Inc. New 95.23 0.68 0.72 5,134,033
DIS Walt Disney Company (The) 104.86 1.48 1.43 12,173,909
EQC.P.D Equity Commonwealth 6.50% Pfd Conv Shs Ser D 25.65 -0.15 -0.58 2,404
CMCSA Comcast Corporation Class A Common Stock 69.45 0.22 0.32 8,580,877
NWS News Corporation 12.40 0.20 1.64 686,638
GCI Gannett Co Inc (New) 10.24 0.21 2.09 1,039,259

Comments

Emerging Growth

Kiwa Bio-Tech Products Group Corp

Kiwa Bio-Tech Products Group Corp develops, manufactures, distributes and markets, cost-effective and environmentally safe bio-technological products for agriculture in China.

Private Markets

Dropbox, Inc.

Dropbox is a service that allows their users to bring all photos, docs, and videos anywhere, and share them easily. Any file saved to Dropbox will automatically save to all…

Uber

Uber connects riders with safe, reliable, convenient transportation providers at a variety of price-points in cities around the world. Uber makes money from charging their drivers 20% of the fare…