Gannett Co., Inc. (NYSE:GCI) announced plans to acquire Belo Corp (NYSE:BLC) that will enhance the portfolio of Gannett Broadcast by two times. After the acquisition, Gannett Co., Inc. (NYSE:GCI) will become the fourth largest owner of major network affiliates. The company will own 21 stations in the top 25 markets.


Terms of the Deal

Both companies have made a joint statement in which they revealed that there has been a definitive merger agreement. As per the agreement, Gannett Co., Inc. (NYSE:GCI) will purchase all outstanding shares of Belo Corp (NYSE:BLC) for $13.75 per share in cash or $1.5 billion along with the assumption of $715 million in existing debt, which has an enterprise value of $2.2 billion.

The transaction, which has been approved by the board of directors of both companies, is a 28.1 percent premium over the closing price of Belo Corp (NYSE:BLC) common stock on June 12, 2013.

How it Will Benefit Gannett

After the acquisition, Gannett stations, which currently stand at 23, will increase to 43 stations. Once the acquisition is over, Gannett Co., Inc. (NYSE:GCI) will be able to step forward towards bigger geographies and the stream of revenues will also be diversified.

After the transaction is completed, it is expected that half of the company’s pro forma EBITDA will be contributed by Gannett Broadcast segment. The digital and broadcasts segment of the company will add approximately two-thirds of total.

As per the expectation of the company, the transaction will produce around $175 million in annual run-rate synergies within the time frame of three years after closing. The cash flow which is expected to be generated after this transaction will be significant.

The transaction valuation implies a 9.4x average 2011/2012 EBITDA multiple prior to synergies, and a 5.4x multiple assuming expected synergies.

Management’s View

Gannett Co., Inc. (NYSE:GCI) President and Chief Executive Gracia Martore said that the company is delighted to merge both the companies of such stature together. Both companies are two big and respected names in the media industry and have award winning journalism, operational efficiency and strong brand leadership, as per the CEO.

Dunia A. Shive, president and chief executive officer of Belo Corp (NYSE:BLC), said that the transaction will be beneficial for the shareholders of Belo. He also said that Gannett Co., Inc. (NYSE:GCI) will prove to be an excellent partner, and he is confident about that.