RICHMOND, Va., June 6, 2013 /PRNewswire/ -- Media General, Inc. (NYSE: MEG) and privately held New Young Broadcasting Holding Co., Inc., both local broadcast television and digital media companies, today announced a definitive agreement to combine the two companies in an all-stock merger transaction. The new company will retain the Media General name and will remain headquartered in Richmond, VA.
Media General owns 18 network-affiliated stations, and Young owns or operates 12 network-affiliated stations. The combination will create a company with 30 stations operating in 27 markets, reaching 16.5 million, or 14%, of U.S. TV households. On a pro forma basis, 2012 revenues were $605 million, including approximately $115 million of political revenues.
The new company will have a strong balance sheet, including significant tax carryover net operating losses that will survive the merger, and an enhanced credit profile, creating opportunities to refinance existing debt at a significantly lower cost of capital. The merger will be accretive to free cash flow in the first full year. The companies have identified $25-30 million of operating and financing synergies.
The balance of network affiliations will include CBS (11), NBC (9), ABC (7) Fox (1), CW (1) and MNT (1). Sixteen of the 30 stations are located in the Top 75 DMAs. The new company will be more geographically diverse and will have a presence in more markets that generate strong political revenues. Its increased size will enhance its ability to participate in retransmission revenue growth, share growth of national and digital advertising, and syndicated programming purchasing.J. Stewart Bryan III, chairman of Media General, said, "The business combination of Media General and Young is a transformational event that will benefit shareholders, employees and the communities we serve. The combination provides immediate accretion to free cash flow, a strong balance sheet, the opportunity to refinance debt at a much lower cost and attractive synergies. Young's management and its owners share Media General's commitment to quality local journalism and to operating top-rated TV stations, making this merger a unique and compelling combination with significant growth potential. I have agreed to vote all of my shares to unwind Media General's dual-class stock structure and to approve the transaction. I look forward to benefiting as a continuing long-term shareholder in the new Media General." Thomas J. Sullivan, executive chairman of New Young Broadcasting, said, "This merger is compelling on many levels and will create a company with valuable strategic assets, significant financial resources and a deep team of talented and experienced personnel. Together, these two great companies will be even better positioned to prosper in today's competitive media environment. I look forward to joining the Media General Board of Directors and working with my new colleagues." George L. Mahoney, president and chief executive officer of Media General, who will retain that role following the merger, said, "We are thrilled to join forces with the Young team and add its great collection of stations and digital assets to ours. I'm very excited about the wonderful opportunities that lie ahead for the new Media General. Our stations and Young's have earned excellent reputations as leading local content providers. In working with the Young management and owners over the past several months, it's clear that we share strong values for customer focus and innovation and a commitment to harnessing the future in an age of rapid change. The new Media General will have a highly competitive broadcasting platform and a strong digital focus, particularly for mobile platforms. We see opportunities for organic growth and other expansion. We expect to take advantage of attractive debt markets and refinance our total debt outstanding at a much lower interest rate. We anticipate a seamless integration of operations and the ability to take advantage quickly of our new operating and financing synergies, to realize the benefits inherent in our combination. We believe the new Media General has outstanding prospects for increasing shareholder value." Deborah McDermott, chief executive officer of New Young Broadcasting, said, "This is an exciting day for Young Broadcasting. We're delighted to find an outstanding strategic business partner in Media General, with its strong stations and digital platforms in attractive markets. Our companies share a commitment to quality broadcasting. Combining our two companies creates opportunities for profitable growth that neither company would be capable of achieving on its own. We look forward to working with the Media General team and to realizing the tremendous potential of this merger, including attractive near-term growth opportunities." Under the merger agreement, Media General will reclassify each outstanding share of its Class A and Class B common stock into one share of a newly created class of Media General common stock, which will be entitled to elect all of Media General's directors. No additional consideration will be paid to the Class B shareholders for giving up their right to directly elect 70% of Media General's directors. Media General will issue approximately 60.2 million shares of the new Media General common stock to Young's shareholders. The estimated total shares outstanding after closing is 89.1 million. Media General's pro forma ownership split will be approximately 32.5% Media General shareholders and 67.5% Young shareholders. The new Media General common stock will be listed on the NYSE and trade under the symbol MEG, subject to NYSE approval of the listing of the new shares.
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