This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

The Deal: Media General Pulls Back After Merger Surge

Stocks in this article: MEGBRK.B

NEW YORK ( TheDeal) -- Media General ( MEG), the Warren Buffett-backed television-station owner pulled-back on Friday after surging yesterday on news of its merger with privately-held New Young Broadcasting Holding Co.

Richmond-based Media General was falling 5.2% to $9.25 after soaring 34% yesterday.

The merger stands to ease Media General's overall leverage, giving it more influence in negotiations with pay-TV operators over fees paid to retransmit their signals.

The deal also stands to make Media General more acquisitive as it looks to increase the number of markets where it owns more than one television station. Media General CEO George Mahoney in an investor call said the deal was "a huge de-leveraging event." The companies did not put a price on the transaction.

Nonetheless, Media General will issue New Young's investors 60.2 million shares, which would be worth about $550 million at the company's Thursday stock price. Nashville-based New Young also has nearly $165 million in debt, which would put the company's value at about $715 million. Young will hold 67.5% of the post-merger company.

Media General also declined to put a multiple on the transaction, which will increase its portfolio of TV stations from 18 to 30.

"If you look at the shares that we're paying over and you look at their $77 million worth of Ebitda and you look at the synergies that we've got," Mahoney said, "you can do the math and you'll like the numbers that you'll come up with."

Berkshire Hathaway Inc. holds about 17% of Media General's Class A shares. Buffett's company provided Media General with a term loan that has a $302 million face value and a revolver with no balance that has a $45 million maximum availability.

Gamco Investors Inc., led by CEO Mario Gabelli, owns a 33% stake of Class A shares in the target, according to regulatory filings. As part of the deal, Media General will unwind its dual-class equity structure that divided stock into Class A and Class B shares.

Media General said that it will arrange a $900 million refinancing. The refinancing would pay Buffett a $44 million premium on debt Berkshire holds. The buyer projects that its leverage will drop from 6.5 times Ebitda to 4.3 times Ebitda.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,805.41 +127.51 0.76%
S&P 500 1,964.58 +13.76 0.71%
NASDAQ 4,483.7150 +30.9230 0.69%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs