Media holding company Gannett Co., Inc. (GCI), the publisher of USA Today, has reached a definitive merger deal to acquire Belo Corp. (BLC) for $13.75 per share cash or around $1.5 billion, plus the $715 million assumption in existing debt for an enterprise value of nearly $2.2 billion. The transaction, which may close by the end of 2013, represents a 28.1 percent premium to the closing price of Belo common stock on June 12, 2013.
The transaction is expected to generate some $175 million in annual run-rate synergies within 3 years after closing, and is also likely to generate significant free cash flow and be accretive to non-GAAP earnings per share by about $0.50 within the first year. The transaction valuation implies a 9.4x average 2011/2012 EBITDA multiple prior to synergies, and a 5.4x multiple assuming expected synergies.
The company added, "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."
As a result of this purchase, Gannett's current broadcast portfolio gets nearly doubled from 23 to 43 stations, including stations to be serviced by Gannett through shared services or similar sharing arrangements. Following the deal closure, Gannett's Broadcast unit would have greater geographic and revenue diversity, with 21 stations in the top 25 markets and would become the #1 CBS affiliate group, the #4 ABC affiliate group, and would expand its already #1 NBC affiliate group position. Following the transaction, Gannett's Broadcast division is likely to contribute more than half of the company's pro forma total EBITDA, and the Digital and Broadcast units combined are projected to contribute nearly two-thirds.
Belo's directors and executive officers, collectively owning around 42 percent of the voting power of Belo's outstanding shares, have inked voting and support agreements to vote their shares in favor of the transaction with Gannett. Gannett is planning to finance the acquisition via. cash on hand, accessing the capital markets and bank financing.
The company would carry on with its share buyback program and has replaced its existing remaining authorization with a new $300 million authorization expected to be used over the next couple of years. Also, it would continue its existing dividend payment program.
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