Media General, LIN Combine in $2.6B Deal

NEW YORK (The Deal) -- Media General  (MEG) said Friday it intends to acquire LIN Media  (LIN) in a $2.6 billion cash, stock and debt deal that would create the nation's second largest "pure-play" television broadcasting company.

Terms of the deal call for Richmond-based Media General to pay $27.82 per share in cash and stock for LIN, a premium of 29% to the target's Thursday close, for total equity consideration of $1.6 billion. Media General will also assume about $968 million in debt.

The aggregate cash amount available to LIN shareholders in the deal is $763 million. Post-close, LIN holders would own about 36% of the combination.

TV station owners such as Gannett  (GCI), Sinclair Broadcast Group  (SBGI), and Nexstar Broadcasting Group  (NXST) have been aggressively consolidating to increase their clout with cable operators, which pay to retransmit broadcasters' content, and the networks, which charge for programming they provide the stations.

The pace of TV deals may slow, because regulators have pushed back against deals that enabled broadcasters to skirt limits on station ownership by setting up partnerships. Sinclair said Thursday that it would rework its $985 million purchase of stations from Allbritton Communications.

Media General said that when combined with Austin, Texas-based LIN it would own or service 74 network-affiliated stations in 46 markets reaching about 23% of U.S. television households. The company said it expects to be forced to divest or swap certain stations to win regulatory approval for the merger.

The combined companies' $491 million in Ebitda would be second among TV broadcasters, exceeded only by Sinclair's $778 million. By number of stations, Media General and Lin would third behind Sinclair, with 166 stations, and Nexstar, with 108.

"Combining Media General and LIN Media will create the second largest pure-play TV broadcasting company in the United States, a financially strong organization that will have opportunities for profitable growth greater than either company could achieve on its own," said Media General chairman J. Stewart Bryan III. "Our two companies share a deep commitment to operating top-rated stations, to providing our local markets with excellent journalism and to engaging in meaningful ways with the communities we serve."


Post-deal Bryan would continue as chairman, with LIN Media CEO Vincent L. Sadusky becoming chief executive officer of the combination. Sadusky will be one of four LIN Media directors added to Media General's 11-person board.

The deal includes a provision that allows LIN Media to window shop through April 25, providing certain information to a third party that submits an acquisition inquiry. LIN would owe a $26.6 million termination fee should a successful competing bidder emerge during that shop period and enter into an agreement by May 15, or a fee of $57.3 million should a rival bid emerge after that period.

Owners of 70% of LIN's combined voting power have agreed to back the transaction, as have holders of about 30% of Media General's shares.

RBC Capital Markets has agreed to provide $1.6 billion in total committed financing to Media General in support of the deal.

RBC bankers Marcos Torres, Shariar Mohajer, Jeffrey Gelles, Philip Katz, and Javier Rocha and Fried, Frank, Harris, Shriver & Jacobson lawyers Abigail Bomba and Philip Richte are advising Media General.

LIN received financial advice from Marco Caggiano of JPMorgan Chase  (JPM) and legal counsel from a Weil, Gotshal & Manges team including Glenn West, Jim Griffin, Kenneth Heitner and Matt Bloch.

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