Coverage: Gray Television buying Raycom for $3.6 billion
Atlanta-based TV station owner Gray Television has a $3.6 billion deal to buy Raycom Media, creating a station group with a wide footprint in the Midwest and South.
Cynthia Littleton of Variety had the news:
The deal marks the latest example of consolidation in traditional TV. The union of Gray and Montgomery, Ala.-based Raycom will bring 142 TV stations under the same roof. The enlarged Gray will reach 24% of U.S. TV households and serve 92 markets, most of them falling below the top 50. The group’s largest markets are Tampa, Fla., Cleveland, and Charlotte, N.C.
“Today we announce the transformation of Gray Television into a true leader in the broadcast television industry,” said Hilton H. Howell, Jr., Gray’s chairman, president and CEO. “Combining our company with the excellent Raycom stations and the superb Raycom employees will create a powerhouse local media operation. Together, this new portfolio of leading local media outlets will excel at what they do best, which is to provide the local news that local communities trust, the entertainment and sports content that viewers crave, and the incredible reach that advertisers demand.”Gray will fork over $2.85 billion in cash and cover the rest of the purchase price with stock, including $650 million newly issued preferred shares.
The post-acquisition plan calls for Howell to serve as co-CEO of the enlarged company alongside Raycom president-CEO Pat LaPlatney. Gray expects the deal to close by year’s end.
Al Tompkins of Poynter reported the deal creates the third-largest television station company:
The FCCopened the gate to megamergers like this last year when it eased restrictions on ownership. Smaller regional owners may be feeling the heat to grow or be eaten. Last week, Disney and Comcast jousted over the purchase of Fox. The federal courts recently approved the AT&T/Time Warner merger. Sinclair Broadcasting Group is still awaiting federal approval to purchase Tribune Broadcasting amid protests. Late last week, Sinclair was still in conversations with the Justice Department about what properties Sinclair would have to divest to get the fed’s approval. Last year, another local owner, Nexstar, purchased Media General putting it in the top echelon of local owners as well.
There are lots of reasons for local broadcasters to want to grow. They increasingly need leverage to bargain with cable companies for retransmission compensation, which has become a significant source of income for local owners. They also are feeling pressure from networks and syndicators to pay more for programming. Bigger ownership means more power to make better deals. Technology also allows local stations to hub some operations including master control, graphics production, business offices and recruiting. Bigger owners also provide upward mobility for staff to grow from small markets to larger operations.
But why would anybody buy television stations when younger audiences increasingly are turning away from TV, especially local TV news? The real opportunity for big media owners may not be in the present, but in the future as over-the-top (OTT) viewership (like Netflix) grows. Local stations may find digital subscription models will open new revenue streams in addition to their over-the-air programming. As Forbes pointed out recently, OTT will create a new advertising model for broadcasters, putting them on the same footing as social media and search engines in being able to deliver micro-targeted advertising.
Eric Mandel of the Atlanta Business Chronicle reported that Raycom will spin off its newspaper operations:
This transaction marks Gray’s transformation from a small, regional broadcaster into a media company with nationwide scale.
The combined company will consist of the following broadcast assets:
- 142 full-power television stations serving 92 markets, the third largest portfolio of stations and markets in the country.
- Station portfolio that reaches 24 percent of U.S. television households.
- 62 television stations ranked first in all-day Nielsen ratings in their local markets.
- 92 percent of markets with the No. 1 or No. 2 Nielsen rated local television station.
- Nearly 400 separate program streams including approximately 165 affiliates of ABC, NBC, CBS, and Fox, and over 100 affiliates of CW, MyNetwork and MeTV.
- Raycom Sports, a marketing, production and events management and distribution company.
- Tupelo Raycom, a sports and entertainment production company.
- RTM Productions, an automotive programming production and marketing solutions company.Broadview Media, a post-production/digital signage company.
Raycom has initiated processes to sell or spin off Community Newspaper Holdings Inc., which owns community newspapers and information products including over 100 titles located in 23 states, as well as PureCars, a digital ad platform for the automotive industry. As a result, Gray will not acquire either CNHI or PureCars as part of this transaction, according to the release.