News and TV giant Gannett Co., Inc. (GCI) agreed Thursday to acquire television company Belo Corp. (BLC) for $13.75 per share or about $1.5 billion, plus the assumption of $715 million in existing debt, in an all-cash deal valued at about $2.2 billion.
The deal, which has the unanimous approval of the boards of directors of both companies, is expected to close by the end of 2013.
"We are thrilled to bring together two highly respected media companies with rich histories of award-winning journalism, operational excellence and strong brand leadership. We have been successfully transforming Gannett into a diversified multi-media company with broadcast, digital and publishing components across high-growth markets nationwide, and this is another important step in the process," Gannett President and CEO Gracia Martore said in a statement.
The offer price of $13.75 per share represents a 28.1 percent premium over Dallas, Texas-based Belo's closing share price of $10.73 on Wednesday. Gannett expects to fund the deal with cash on hand, accessing the capital markets and bank financing.
Following the announcement of the deal, Belo shares are surging by 28 percent and Gannett shares are trading higher by nearly 22 percent in early dealings.
Gannett anticipates that the deal will generate about $175 million in annual run-rate synergies within three years after closing, and also be immediately accretive to adjusted earnings by about $0.50 per share within the first 12 months.
For McLean, Virginia-based Gannett, the publisher of USA Today, the proposed deal accelerates its ongoing transformation into a diversified high-margin multi-media company. The deal will help Gannett nearly double its broadcast portfolio from 23 to 43 stations, and create the fourth-largest owner of major network affiliates with 21 stations in top 25 markets, have greater geographic and revenue diversity.
"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," Martore added.
The deal will create a combined company that will be a broadcast "Super Group, and also be the nation's fourth-largest owner of major network affiliates reaching nearly a third of all U.S. households.
The closure of the deal is primarily subject to antitrust approval, Federal Communications Commission (FCC) approval, and approval by holders of two-thirds of the voting power of Belo shares.
Meanwhile, Belo's directors and executive officers, who collectively own about 42 percent of the voting power, have entered into voting and support agreements to vote their shares in favor of the transaction with Gannett.
Additionally, Gannett said it will continue its share buyback program and has replaced its existing remaining authorization with a new $300 million authorization that will be used over the next two years.
Gannett noted that it will also continue its existing dividend payment program, and expects to promptly pay down the debt associated with this transaction as it is expected to generate significant free cash flow.
GCI closed Wednesday's regular trading session at $19.85, down $0.52 on a volume of 1.92 million shares, and BLC closed at $10.73, down $0.50 on a volume of 0.55 million shares.
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