UPDATED: Media General and Young Broadcasting shocked many in the
broadcast world with word of their planned merger. The new entity will comprise
30 affiliated stations in 27 markets, reaching 14% of U.S. households, and will
be known as Media General.
"This is a truly transformational event for Media
General," said George Mahoney, president and CEO of Media General.
"We look at it as a perfect marriage for two like-minded
Station groups are under considerable pressure to grow their
footprint, resulting in an unparalleled degree of consolidation.
Investors on a conference call announcing the merger largely
applauded the new Media General. "It's not quite the outcome we expected,
but it really is quite brilliant," said Barry Lucas, senior analyst at
Gabelli & Co.
The merger is expected to close late in the third quarter or
early in the fourth.
Mahoney is president and CEO of the expanded group. Deb
McDermott, president and CEO at Young, will report to Mahoney and will oversee
the TV stations as senior vice president. Young VP of station
operations Bob Peterson will likely be one of three vice presidents in the broadcast division, along with Media General veterans Jim Conschafter and John Cottingham.
"This is really something our shareholders and our
company had been looking for," McDermott told B&C, "to have a good partner and have more of a presence
in the business -- to be larger and be stronger."
Time will tell what Media General does with KRON San
Francisco, which Young famously paid $823 million for in 2000, which lost its
NBC affiliation and which crippled the broadcaster's financial situation and in
large part pushed Young into bankruptcy.
The Young stations, including WKRN Nashville and WTEN
Albany, have stood on solid footing since emerging from Chapter 11 in 2010,
which wiped away $800 million of debt.
Mahoney applauded the efforts at KRON. "Young has done
a terrific job taking that station from something that was in a cash-flow
deficit situation and turning it to a cash-flow positive," he said.
"They run 55 Â½ hours a week of local news, which is remarkable for any station.
We're very impressed with what they've managed to accomplish. I think there are
lessons there for Media General and maybe the industry. It's a really nice
Media General's pro forma ownership split will be
approximately 32.5% Media General shareholders and 67.5% Young shareholders.
The companies have identified $25-$30 million of operating and financing
synergies, and Mahoney said the new Media General will continue to seek out
Young's duopoly markets include Lansing and Albany.
Media General unloaded its newspaper group last year, paving
the way to faster growth as a pure play broadcaster. With 14% U.S. coverage,
the expanded Media General will be on par with the likes of Belo (14.6%) and
The planned merger comes at a time of rabid M&A in local
television, as the pressure to maximize retrans payments from MVPDs and to
exercise leverage in network agreements have compelled station groups to
increase their might.
Sinclair and, to a lesser extent, Nexstar, have been
extraordinarily active in growing their groups.
president and CEO Perry Sook outlined his vision of the local broadcast
landscape in 2020 to B&C early
this year: 10-12 "major" station groups, comprised of the four
network-owned outfits, and a half-dozen other players reaching 20% or more of
the U.S., and booking around a billion in revenue.
"I would think within two to five years, you'll see the
emergence of what I call three or four super-groups, and I think you'll see a
couple emerge sooner rather than later," said Sook.
Smaller groups, he added, will have a very difficult time
Groups that have been absorbed in recent years include
Freedom, New Vision, Communications Corp. of America and Barrington. Young
Broadcasting, at least in name, will cease to exist as well after the merger is
completed. McDermott says Young benefits from the rich legacy of Media General,
which dates back to 1850.
"They are our company," she said.
"We are blended into a company that has that kind of tradition. It's going
to be a very good thing for our company."