ATLANTA
and MONTGOMERY, Ala.,
June 25, 2018 /PRNewswire/
-- Gray Television, Inc. ("Gray") (NYSE: GTN and GTN.A)
and Raycom Media, Inc. ("Raycom"), an employee-owned
company, jointly announced today that they have entered into
an agreement to combine their companies in a transformative
transaction that will create the single largest owner of top-rated
local television stations and digital assets in the
country.
This transaction marks Gray's transformation from a small,
regional broadcaster into a leading media company with nationwide
scale based on high-quality stations with exceptional talent in
attractive markets. Gray and Raycom have highly complementary
portfolios of television stations as well as highly complementary
company cultures, award-winning journalistic commitments, and long
histories of commitments to exceptional community service.
Gray in particular is delighted to announce that, upon the closing,
Raycom President and CEO, Pat
LaPlatney, will become Gray's President and Co-Chief
Executive Officer. In addition, Mr. LaPlatney and Raycom's
former President and CEO, Paul
McTear, both of whom are currently members of Raycom's Board
of Directors, will join Gray's Board of Directors. At that
time, Hilton Howell will become
Executive Chairman and Co-Chief Executive Officer of Gray.
The transaction is subject to customary closing conditions and
regulatory approvals. The parties expect to close the
transaction in the fourth quarter of 2018.
Gray also announced today that, on July
1st, Bob Smith will become
its Chief Operating Officer and Nick
Waller will become its Chief Administrative Officer.
Currently, Bob and Nick serve as Co-Chief Operating Officers.
In his new role, Bob will oversee station operations and sales
operations through the closing of the transaction. During
that period, Nick will oversee human resources, information
technology, traffic and CRM systems, capital projects, and
performance benchmarking. Nick also will focus on the
transition and integration of pending acquisitions.
As detailed below, Gray and Raycom will host a conference call
for all stakeholders and other interested parties beginning at
9:00 a.m. Eastern today to discuss
this transaction further. Additional information about the
transaction can be obtained from Gray's Current Report on Form 8-K
being filed with the SEC in connection with the announcement of
this transaction, including the investor presentation furnished
therewith, which presentation will also be available on Gray's
website.
A Compelling Combination
The combination will create a dynamic broadcaster with
meaningful scale, significant operating leverage, and a compelling
portfolio of high quality assets. In particular, the combined
company will consist of the following broadcast assets, giving
effect to all other pending acquisitions by both companies and
prior to any divestitures:
- 142 full-power television stations serving 92 markets, the
third largest portfolio of stations and markets in the
country.
- A high-quality station portfolio that reaches 24 percent of
U.S. television households, ranging from large markets such as
Tampa-Sarasota, Cleveland, and Charlotte, to some of the
smallest markets like Ottumwa, Fairbanks, Presque Isle and North
Platte.
- 62 television stations ranked first in all-day Nielsen ratings
in their local markets, which is the highest number of top-ranked
television stations owned by any broadcaster.
- 92 percent of markets with the #1 or the #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.
In addition to high quality television stations, Gray will
acquire several additional Raycom businesses that will result in a
more diversified media company. These businesses include:
- 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. ("CNHI"), 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.
Excluding CNHI and PureCars, the combined net revenue of both
companies on a blended 2016/2017 basis would total approximately
$2 billion.
Transaction Summary
Gray expects that the Raycom transaction will be substantially
accretive on a free cash flow per share basis.
Under the terms of the merger agreement between the parties,
Gray will acquire Raycom for $3.647
billion in total proceeds, consisting of $3.547 billion in enterprise value and
$100 million of Raycom cash.
The consideration will consist of $2.85
billion in cash, $650 million
in a new series of preferred stock, and 11.5 million shares of Gray
common stock.
Wells Fargo has underwritten
the debt financing portion of the transaction in the amount of
$2.525 billion. Gray's existing
Term Loan B and Senior Unsecured Notes will remain in place.
Expected strong free cash flow generation through the closing of
all pending transactions and throughout 2018 should allow Gray to
deleverage its capital structure following the closing. Gray
anticipates that, assuming a year-end 2018 closing, its total
leverage ratio, net of all cash, would approximate 5.0 times
trailing eight-quarter operating cash flow, including estimated
synergies.
Including expected synergies and excluding CNHI and PureCars,
the transaction purchase price represents a multiple of
approximately 7.5 times a blended average of Raycom's anticipated
2018/2019 operating cash flow and 7.8 times a blended average of
Raycom's anticipated 2017/2018 operating cash flow. This
multiple includes approximately $80
million in identified contract, insourcing, and other
efficiency synergies during the first full calendar year following
the closing. The multiple also includes the anticipated net
present value of the deferred tax asset resulting from Raycom's net
operating losses.
The transaction has been approved unanimously by the Boards of
Directors of both Gray and Raycom. The transaction has also
been approved by the requisite vote of the Raycom
shareholders. No Gray shareholder vote will be required.
Gray shareholders will retain 89 percent of the economic
ownership of the Company following the closing.
Clear Regulatory Path to Prompt Closing
As noted, Gray and Raycom have highly complementary portfolios,
and, as such, their combination should create only minimal
regulatory issues. To facilitate prompt approvals and
therefore the transaction closing, Gray has elected to divest
television stations in each of the nine overlap markets rather than
seek regulatory approvals of potentially permissive combinations in
certain markets. Specifically, Gray intends to retain and
divest stations in the overlap markets as follows:
Market (DMA
Rank
and
Name)
|
Retained
Full-Power Stations
(November 2017
All-Day Rank)
|
Divested
Full-Power Stations
(November 2017
All-Day Rank)
|
61
Knoxville
|
Gray WVLT (#2
CBS)
|
Raycom WTNZ (#5
Fox)
|
78 Toledo
|
Gray WTVG (#2
ABC)
|
Raycom WTOL (#1
CBS)
|
86 Waco
|
Gray KWTX (#1
CBS)
|
Raycom KXXV (#3
ABC)
|
108
Tallahassee
|
Gray WCTV (#1
CBS)
|
Raycom WTXL (#2
ABC)
|
112
Augusta
|
Gray WRDW (#2
CBS)
|
Raycom WFXG (#3
Fox)
|
144 Odessa
|
Gray KOSA (#1
CBS)
|
Raycom KWES (#2
NBC)
|
151 Panama
City
|
Gray WJHG (#1
ABC)
|
Raycom WPGX (#4
Fox)
|
154 Albany
|
Raycom WALB (#1
ABC)
|
Gray WSWG (#3
CBS)
|
173 Dothan
|
Gray WTVY (#1
CBS)
|
Raycom WDFX (#3
Fox)
|
Today, Wells Fargo Securities will begin a formal process to
market the divestiture stations to qualified third parties.
The divestitures may take the form of cash sales, swaps involving
other television stations, or a combination of cash and
swaps. Interested parties should contact Wells Fargo
Securities directly and should not contact Gray or Raycom about the
divestiture opportunities. The planned divestiture stations
collectively represent less than 4 percent of the operating cash
flow of the combined company (excluding CNHI and PureCars).
Based on the foregoing divestiture plan and the lack of other
anticipated material regulatory concerns that might arise from the
combination, the parties expect to close their transaction
following receipt of regulatory and other approvals in the fourth
quarter of 2018.
CEO Comments on Transformative Transaction
"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. Indeed, this is
a transaction in which there can be no doubt that local community
standards will be honored and embraced. We are excited to
welcome the dedicated reporters, account executives, and
technologists of Raycom to our growing corporate family. On
behalf of the Board, our employees, and our investors, I convey our
deepest gratitude to Jim Ryan and
Kevin Latek for leading our efforts
on this momentous, transformative transaction."
"We are thrilled to be joining Gray Television as we share the
same core values of journalistic excellence and community service,"
said Pat LaPlatney, Raycom Media's
President and CEO. "Together, we will be a stronger, more impactful
force for our audiences, advertisers, and communities. I have
tremendous respect for the way Hilton
Howell and Gray Television have grown their portfolio with a
focus on localism. I look forward to working alongside
Hilton and the wonderfully talented people of Gray Television as
the combined entities create an even greater opportunity for growth
as a leader in the broadcast industry. I also want to extend
a special thank you to Paul McTear,
Becky Sheffield, Ellenann Yelverton and the entire Raycom team
for their tireless efforts on this transaction."
Conference Call Information:
Gray and Raycom will host a conference call on Monday, June 25, 2018. The call will begin
at 9:00 a.m. Eastern Time. The
live dial-in number is 1-855-493-3489 (international number:
(720) 405-2158) and the confirmation code is 7358059. The
call will stream live and be available for replay at
www.gray.tv. Until July 25,
2018, a taped replay of the conference call will be
available at 1-855-859-2056 with the confirmation code 7358059.
Advisors:
Wells Fargo Securities, LLC served as financial advisor and
Cooley LLP and Jones Day served as
legal counsel for Gray. Stonebridge Capital served as
financial advisor and Robinson
Bradshaw and Covington & Burling served as legal counsel
for Raycom.
About Gray:
Gray owns and/or operates over 100 television stations across 57
television markets that collectively broadcast over 200 program
streams including over 100 channels affiliated with the CBS
Network, the NBC Network, the ABC Network and the FOX
Network. Our portfolio includes the number-one and/or
number-two ranked television station operations in essentially all
of our markets, which collectively cover approximately 10.4 percent
of total United States television
households. For further information, please visit www.gray.tv.
About Raycom:
Raycom Media, an employee-owned company, is one of the nation's
largest privately-owned local media companies and owns and/or
provides services for 65 television stations and 2 radio stations
in 44 markets located in 20 states. Raycom Media owns or provides
services for stations covering 16% of U.S. television households
and employs over 8,300 individuals in full and part-time positions.
In addition to television stations, Raycom Media is the parent
company of CNHI (community newspapers and information products;
over 100 titles located in 23 states), PureCars (digital ad
platform for the automotive industry), Raycom Sports (a marketing,
production and events management and distribution company), Tupelo
Raycom (sports and entertainment production company), RTM
Productions (automotive programming production and marketing
solutions company) and Broadview Media (a post-production/digital
signage company). Raycom Media is headquartered in Montgomery, Alabama.
Forward-Looking Statements:
This press release contains certain forward looking statements
that are based largely on Gray's current expectations and reflect
various estimates and assumptions by Gray. These statements are
statements other than those of historical fact, and may be
identified by words such as "estimates", "expect," "anticipate,"
"will," "implied," "assume" and similar expressions. Forward
looking statements are subject to certain risks, trends and
uncertainties that could cause actual results and achievements to
differ materially from those expressed in such forward looking
statements. Such risks, trends and uncertainties, which in some
instances are beyond Gray's control, include Gray's inability to
complete its pending acquisition of Raycom, on the terms and within
the timeframe currently contemplated, any material regulatory or
other unexpected requirements in connection therewith, or the
inability to achieve expected synergies therefrom on a timely basis
or at all, the impact of recently completed transactions, estimates
of future retransmission revenue, future expenses and other future
events. Gray is subject to additional risks and uncertainties
described in Gray's quarterly and annual reports filed with the
Securities and Exchange Commission from time to time, including in
the "Risk Factors," and management's discussion and analysis of
financial condition and results of operations sections contained
therein, which reports are made publicly available via its website,
www.gray.tv. Any forward-looking statements in this presentation
should be evaluated in light of these important risk factors. This
presentation reflects management's views as of the date hereof.
Except to the extent required by applicable law, Gray undertakes no
obligation to update or revise any information contained in this
presentation beyond the published date, whether as a result of new
information, future events or otherwise.
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SOURCE Gray Television, Inc.