Gray/Meredith TV Stations Seen Getting Regulatory OK
Gray Television agreed to buy Meredith’s 17 TV stations for $2.7 billion, they announced (see here and here) Monday. This includes one overlapping market where Gray plans to divest a station, it won’t put Gray over national ownership limits, and it isn’t expected to hit regulatory snags, broadcast attorneys and analysts said in interviews. Expected to be completed in Q4, the deal would make Gray No. 2 broadcaster by revenue. It would give Gray access to larger markets and leaves room for more acquisitions, making the company a “super-broadcaster,” said Noble Capital Markets' Michael Kupinski.
Meredith would separate into two companies, selling its local media division to Gray, while forming a new publicly traded company -- bearing the Meredith name and stock ticker symbol -- focused on the company’s magazines and digital properties, such as Better Homes and Gardens and Allrecipes, said Meredith CEO Tom Harty on a call Monday. “Consolidation continues to rapidly change the local broadcast landscape.” Now “is an attractive time to monetize” Meredith’s TV stations, he said. He'll lead the new Meredith (see personals section, this issue.)
The lone divestiture will be Gray’s WJRT-TV Flint, Michigan. “We are intensely disappointed that government regulations will force us to divest ABC 12,” said Gray CEO Hilton Howell on a call. Gray will keep Meredith’s WNEM-TV Bay City, Michigan, along with 16 other Meredith stations including WGCL-TV Atlanta, and KMOV St. Louis. A buyer for the station being divested hasn’t been determined, Gray said.
Many of the markets are adjacent to where Gray owns a station, said Howell. Gray’s acquisition strategy is to target markets likely to feature contested political races, Howell said. “I look forward to the political races of 2022 with these assets in place,” he said of the Meredith stations. Somewhat unusual in takeovers, the stock of the buyer closed up. Gray rose 9.1% to $22.17 while Meredith gained 13% to $35.21. Meredith shareholders get about $14.50 cash per share "and 1-for-1 equity share in post-close Meredith."
Gray would reach 36% of U.S. households, 25% using the UHF discount. That’s under the national cap of 39%. Gray Chief Legal and Development Officer Kevin Latek said on a conference call the company isn’t seeking any special FCC ownership permissions, in line with Gray’s strategy in previous transactions: “We are not asking for a rules waiver, this is a clean transaction.” The agency didn’t comment.
The change in leadership at the FCC and the specter of new broadcast ownership rules stemming from the Supreme Court’s ruling on the agency’s Prometheus appeal “have absolutely no bearing” on the timing of this deal or Gray’s also-pending Quincy transaction (see 2102010072), Latek said. Gray has long been able to grow “regardless of the administration,” Latek said. Due to the stations and markets involved, the Meredith deal would be a good fit for Gray regardless of whether rule changes were anticipated, said BakerHostetler broadcast attorney Dan Kirkpatrick in an interview.
The purchase will increase Gray’s involvement with ATSC 3.0, said Latek. Gray, like Meredith, is a member of the Pearl TV consortium but has launched just one station on the standard. Meredith had stations involved in the early stages of the rollout, such as the Phoenix pilot of the standard and in Portland, Oregon, Latek said. A 3.0 transition is planned for Gray stations in Charlotte and then several others, Latek said. The deal makes ATSC 3.0 “more of a near-term” consideration for Gray, Latek said.
Meredith has been unofficially on the market for a decade, said Kupinski. Other deals that don’t push up against regulatory limits are possible, as the pace of broadcast consolidation is likely to slow until there are rule changes, the analyst said: “There are fewer and fewer mom-and-pops out there for the next wave” of consolidation.