Under the terms of the agreement, Meredith shareholders will receive cash and stock valued at US$51.53 per share, which represents a 12 per cent premium to Meredith’s closing stock price on September 4, 2015. Both classes of Meredith stock, Common Stock and Class B Common Stock, will receive the same consideration per share. Based on Meredith’s net debt balance of $772m at June 30, 2015, the transaction enterprise value is approximately $3.1bn.
Media General has formed a new holding company, which after closing will be named Meredith Media General. Media General shareholders will receive one share of the new holding company for each share of Media General they own upon closing. Meredith shareholders will receive $34.57 in cash and 1.5214 shares of the new holding company for each share of Meredith they own upon closing. Upon the closing of the transaction, Media General shareholders will own approximately 65 per cent and Meredith shareholders will own approximately 35 per cent of the fully-diluted shares of Meredith Media General.
Upon the closing, the Board of Directors will consist of 12 directors, eight appointed by Media General and four appointed by Meredith. J. Stewart Bryan III, current Media General Chairman, will be Chairman of Meredith Media General.
Stephen M. Lacy will lead Meredith Media General as Chief Executive Officer and President. Joseph H. Ceryanec will be the Chief Financial Officer. The balance of Meredith Media General’s senior management team will be a combination of the two existing executive teams. The company will maintain corporate and executive offices in Des Moines and Richmond. Meredith Media General will be incorporated in Virginia.
Meredith Media General will be well positioned to grow in a rapidly consolidating and evolving media industry. It will use its strong financial profile to deliver substantial value to shareholders, customers and employees. This financial profile includes:
- Pro-forma annual revenues of $3bn and EBITDA of over $900m;
- More than $80m of total synergies expected within the first two years with $60m of run-rate synergies expected in the first 12 months of operations post-closing;
- Significant free cash flow that can be used to rapidly pay-down debt;
- Expected pro forma net leverage at closing of less than 5.5x, based on 2014/2015 average pro forma adjusted EBITDA, as per Media General’s credit agreement;
- Consistent with Meredith’s long history of Total Shareholder Return, a strong commitment to returning cash to shareholders via dividends over the longer term; and
- The opportunity to continue growing and expanding its portfolio on the national and local level as the media industry consolidates.
Media General Chairman J. Stewart Bryan III said, “This merger creates greater opportunities for profitable growth than either company could achieve on its own. Importantly, shareholders of both companies will benefit from the upside potential of a diversified and strategically well-positioned media company with a strong financial profile and the ability to generate significant free cash flow.”
Meredith CEO Steve Lacy said, “We are excited about the opportunity to create a powerful new multiplatform and diversified media company with significant operations on the local and national levels. This merger will create a strong and efficient company positioned to realise the significant earnings and cash flow potential of local broadcasting; leverage the unparalleled reach and rich content-creation capabilities of Meredith’s national brands; and capture the rapidly developing growth potential of the digital media space. It also positions Meredith Media General to deliver enhanced shareholder value and participate in future industry consolidation.”
Meredith Media General will boast a portfolio of best-in-class media platforms including:
- Third-largest local television station owner, initially with 88 television stations across 54 markets that reach 30 per cent – or approximately 34m – U.S. TV households. It will include 40 Big Four network-affiliated TV stations located in the Top 75 DMAs. Stations in six markets will be swapped or otherwise divested in order to address regulatory considerations. These markets are Portland, OR; Nashville, TN; Hartford-New Haven, CT; Greenville-Spartanburg, SC-Asheville, NC; Mobile, AL-Pensacola, FL; and Springfield, MA. To the extent that the company is able to successfully execute swaps, as opposed to outright sales, it will further enhance the combined company’s size and scale. Moelis & Company has been retained to manage the process of divesting stations in overlapping markets to facilitate regulatory approval.
- Leading multiplatform national media brands with a top female reach of 100m unduplicated American women and over 60 per cent of US millennial women. These category leading brands include Better Homes and Gardens, Allrecipes, Parents and Shape.
- A powerful digital platform reaching over 200m monthly unique visitors via a combination of leading national and local consumer sites and business-to-business digital capabilities in key growth sectors such as content, mobile, social, video, and native advertising. Digital revenues are expected to exceed $500m in the first full year of operations post closing.
- Diverse revenue streams including a Top 3 global brand licensing program and leading marketing services agencies.
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