Media General is buying Meredith Corp. in an approximately $2.4 billion cash-and-stock deal, the latest in a series of mergers between local broadcasters looking to gain leverage in negotiations with pay TV providers.
The combined company, called Meredith Media General, will have 88 television stations in 54 markets and media brands such as Better Homes and Gardens, Allrecipes, Parents and Shape.
Meredith owns KCTV and KSMO in the Kansas City market. Media General owns television stations in Topeka and Wichita.
By acquiring Meredith, Media General will gain footholds in Kansas City, Atlanta, St. Louis, Las Vegas, and Phoenix, where Meredith owns two stations. Meredith Media General will also own three stations in Portland, Ore., and two in Nashville, Tenn.
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Meredith says it focuses on fast-growing markets, and it owns 16 stations and operates a 17th station. The company says seven of those are in the top 25 in the U.S. Its holdings include seven CBS affiliates and five Fox affiliates.
The combined company will be able to charge higher rates, known as retransmission fees, to pay TV providers like DirecTV for the right to carry their stations, analysts said. The merger is the latest in a flurry of similar deals between local TV broadcasters. In 2013, Gannett agreed to buy Belo for about $1.5 billion, while Media General bought New Young Broadcasting Holding Co.
“There is value to be driven by scale in broadcasting and the ability to garner higher retrans fees,” said William Byrd, a media analyst at FBR Capital Markets. “There is an advantage to having more stations deliver more content.”
Meredith also publishes about 20 magazines, including Better Homes and Gardens, Parents, Family Circle, Allrecipes, Martha Stewart Living and EveryDay with Rachael Ray, with about 130 special interest publications. Its most popular online brand is Allrecipes.
Meredith shareholders will receive cash and stock valued at $51.53 per share. That’s a 12 percent premium to the company’s Friday closing price of $45.94. Media General stockholders will own about 65 percent of the combined company, while Meredith shareholders will own approximately 35 percent.
Meredith CEO Steve Lacy will serve as CEO and president of the combined company.
Meredith Media General will maintain corporate and executive offices in Des Moines, Iowa, and Richmond, Va. Meredith is based in Des Moines, while Media General is based in Richmond.
The companies expect more than $80 million in total savings in the first two years after the transaction closes.
Both companies’ boards approved the deal, which is to close by June 30, 2016. It still needs approval from Meredith and Media General shareholders and the Federal Communications Commission.