Station groups Media General and LIN are poised to merge in a $1.6 billion cash and stock deal that will create the nation’s second-largest pure-play broadcast group.
The combination will bring together 74 stations, most of the network affiliates, in 46 markets, reaching 23% of U.S. TV households. The deal unveiled Friday calls for Media General to acquire LIN with $763 million in cash and the remainder in stock. With LIN’s roughly $1 billion in debt included, the deal has an enterprise value of $2.6 billion.
The Media General-LIN union continues the breakneck pace of consolidation in the TV station sector during the past two years. The combo will make Media General the second-largest owner of TV stations behind Sinclair Broadcast Group, which has 167 outlets.
Broadcasters maintain they need more size and scope to give their local outlets clout in dealing with national advertisers and MVPD giants — an arena that promises to see more consolidation a la the pending union of Comcast and Time Warner Cable. Local station operators are also facing more pressure from network partners to fork over annual fees to help pay for pricey primetime programming and sports rights.
The agreement calls for LIN prexy-CEO Vincent Sadusky to become CEO of the enlarged Media Genera, based in Richmond, Va. Media General’s J. Stewart Bryan III will continue as chairman of the board. The company will retain the Media General moniker. Execs assured that the company will still be in the hunt for more acquisitions.
“Combining Media General and LIN Media will create the second largest pure-play TV broadcasting company in the United States, a financially strong organization that will have opportunities for profitable growth greater than either company could achieve on its own,” Bryan said. “Our two companies share a deep commitment to operating top-rated stations, to providing our local markets with excellent journalism and to engaging in meaningful ways with the communities we serve. The prospects for digital media growth are particularly exciting.”
LIN has been active in developing digital media offshoots for its stations, particularly through mobile applications. Just last month it bought the troubled digital ad Federated Media at a fire-sale price of $22 million. The larger scale of the combined company will fuel efforts to expand the stations’ digital reach.
“This is an exciting and historic day for both companies,” Sadusky said. “The merger of two highly respected broadcasters with superior television and digital assets creates maximum value for shareholders and provides us the scale, breadth and resources to compete more effectively in the rapidly evolving media landscape. Together, we will be able to better serve our local communities throughout our significant and diverse geographic footprint and further grow our national digital business.”
Media General’s largest market is San Francisco, where it owns the indie KRON-TV, one of the few stations in the group not affiliated with a network. Most of its stations are in small- and mid-sized markets such as Tampa, Fla., Columbus, Ohio and Raleigh-Durham, N.C. LIN’s largest outposts are in Portland, Ore. and Indianapolis.
The spike in political advertising dollars flowing to local TV stations since a pivotal 2010 Supreme Court decision has also been a driver of station consolidation. In pitching the deal to investors Thursday, execs noted the prevalence of Media General-LIN stations in battleground states such as Wisconsin and Ohio.
Media General projects $70 million in operational savings within three years of the deal closing, which is projected for early next year.
In a conference call with investors, Sadusky emphasized the importance of local station owners having broader scale throughout the country.
“It’s a good thing and healthy thing to have quality players like us come together … to have conversations with these larger entertainment companies,” Sadusky said.