Gannett Co., the parent company of The Indianapolis Star, will nearly
double its television station holdings by buying Belo Corp. in a deal worth $2.2
The agreement, announced Thursday, will make Gannett the nation's fourth-largest owner of major TV network affiliates, with 43 stations that cover 21 of the top 25 TV-viewing markets.
The McLean, Va.-based media company's stock price shot up on the news, jumping 34 percent, or nearly $7 a share, to close Thursday at $26.60. The stock has doubled in value in the past year.
Shares of Belo Corp. finished the day up more than 28 percent, or about $3, at $13.77.
None of the 20 Belo stations is in Indiana. The closest is WHAS, an ABC network affiliate in Louisville. It is one of five stations Gannett is acquiring from Belo that, due to overlapping media properties in the same market that raise federal antitrust concerns, will be serviced by Gannett after the deal closes but set up under a separate ownership structure.
The deal "shows Gannett's commitment to local news and local communities," said Karen Crotchfelt, publisher and president of The Indianapolis Star, Gannett's largest Indiana holding. "Although there is no direct impact to our more than 1,300 employees in our Indiana operations, our employees, readers and clients will all benefit from our company's transformation and focus on serving the great good of local communities."
In addition to The Indianapolis Star, Gannett's Indiana operations include the Lafayette Journal and Courier, The Star Press of Muncie and the Richmond Palladium-Item, as well as the websites affiliated with those newspapers. Indianapolis operations also provide print production, digital design, and advertising services.
Gannett will pay $1.5 billion in cash to buy publicly traded Belo for $13.75 a share. That is a 28 percent premium over Belo's closing price on Wednesday. Gannett also will assume $715 million in existing debt from Belo.
Gannett President and CEO Gracia Martore called the acquisition an "important step" in Gannett's diversification and said it will significantly improve the company's cash flow and financial strength.
"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."
The transaction underscores exposure by Gannett, which owns 82 daily newspapers, to weakening advertising revenues from its print products. The company's publishing business declined 23 percent in operating income last year from 2011, while its broadcast division gained 47 percent in the same period. Total digital revenues grew 24 percent, to $1.3 billion.
Belo President and CEO Dunia Shive said the sale is an "outstanding and financially compelling transaction" for his company's shareholders.
The companies expect to close the deal by the end of the year. It is subject to antitrust scrutiny and requires Federal Communications Commission approval, as well as approval by two-thirds of the shareholders of Belo, which is based in Dallas.
Both companies' boards have approved the deal, and Belo executives and shareholders representing about 42 percent of the company's voting power have agreed to support the sale.
The pace of mergers has been accelerating in the broadcast-TV industry since 2011. Last week, Media General Inc. agreed to buy New Young Broadcasting Holding Co., while Sinclair Broadcast Group Inc. has spent more than $1.84 billion on broadcasters in the past two years.
"Consolidation continues in the industry," said Tracy Young, a media analyst at Evercore Partners. "At the end of the day there'll be a handful of players."
The wave of mergers is driven, in part, by the fees stations and broadcast networks are beginning to extract from cable and satellite operators such as Comcast Corp. and DirecTV in exchange for distributing local-TV programming.
(c)2013 The Indianapolis Star
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Distributed by MCT Information Services
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