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What: Shares of Media General (NYSE: MEG) were soaring today, up as much as 29% today after the broadcaster announced a merger with privately held New Young Broadcasting.
So what: The two companies will combine in an all-stock transaction, forming a media enterprise with 30 stations in 27 markets, reaching 16.5 million, or 14% of U.S. TV households. The new company, still to be known as Media General and trading under the same ticker symbol, also expects to see free cash flow improve in the first year, and said cost-saving synergies would be the range of $25 million to $30 million. Current Media General shareholders will only own about a third of the new company, however. New Young had more than $600 million in revenue last year, compared to Media General's $360 million.
Now what: Media General certainly appears poised to become a stronger company after the combination, growing from 18 to 30 TV stations nationwide. The merger is the latest step in Media General's attempt to rejuvenate its business after several years in the red. Last year, it sold off all of its print media assets, many to Berkshire Hathaway, which has a 17% stake in Media General. Profits aren't guaranteed after the merger, of course, but it looks like a step in the right direction.
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