The TV broadcasting business has just gotten a major vote of confidence from Gannett, the No. 1 U.S. newspaper company. This morning, Gannett announced that it agreed to buy regional television company Belo in a $2.2 billion dollar deal, creating what it calls a broadcast “Super Group” and nearly doubling the size of its TV holdings.
According to a statement from the companies, Gannett will pay around $2.2 billion, which includes $1.5 billion in Belo shares and another $715 million in existing debt. The deal has already been passed by both companies’ boards and is expected to close at the end of this year, subject to approval by the FCC.
When the deal closes, Gannett’s TV holdings will increase from 23 to 43 stations, making Gannett the country’s fourth-largest owner of major network affiliates, and reaching nearly a third of all U.S. households. With the addition of Belo’s Dallas and Houston affiliates, Gannett will have a total of four stations in top 10 markets (it already owns affiliates in Atlanta and Washington, D.C.) and will become the No. 1 CBS affiliate group and No. 4 ABC affiliate group while expanding its position as the No. 1 NBC affiliate group.
"Scale really matters. We had a unique opportunity to put two great franchises together that have a dedication to local journalism," Gracia Martore, president and CEO of Gannett, said during a conference call with investors today. "We think this is a terrific business."
The deal also will decrease Gannett's reliance on its traditional print media operations, which are struggling like the rest of the newspaper industry. More than half of the combined group's operating profitability will come from broadcast after the acquisition, with two-thirds coming from broadcast and digital. "It's a significant shift in our business mix," Martore said.
Though the FCC will need to approve the deal, Gannett's Martore wasn't worried. There are minimal overlaps between the two group station portfolios, with only five market overlaps, including Phoenix, where the combined group would own three top-rated stations. The FCC is likely to require a divestiture to come into compliance with FCC duopoly rules. Gannett told investors during the conference call that it intends to restructure ownership in those five markets and cut joint sales and shared service agreements. The move could raise some eyebrows from critics of media consolidation who are pushing the FCC to count such deals towards the current ownership rules, however.
Belo owns 20 local TV stations—including ABC, CBS, NBC, Fox and the CW affiliates—in 15 markets across the U.S. Belo spun off its newspapers in 2007, forming a separate Dallas-based media company called the A.H. Belo Corp.
—With Katy Bachman contributing