In a move that will create a broadcasting "super group," Gannett (GCI) plans to acquire all the outstanding stock of Belo (NYSE: BLC) for $13.75 a share, an estimated $1.5 billion in total, the companies announced today.
Gannett will also assume $715 million in existing Belo debt, putting the total value of the deal at $2.2 billion. The agreed-upon sales price equates to a premium of approximately 28% from Belo's closing share price Wednesday.
The deal would make Gannett the nation’s fourth-largest owner of major network affiliates, the companies said, reaching nearly a third of all U.S. households.
Upon completion of the transaction, which is expected by the end of 2013, Gannett estimates the acquisition will generate $175 million in synergies within three years. Additionally, the deal will be accretive within a year, adding an estimated $0.50 a share to Gannett's non-GAAP earnings in the first 12 months.
Gannett CEO Gracia Martore said the deal will "significantly improve our cash flow and financial strength, enabling us to quickly pay down debt while remaining committed to disciplined capital allocation." Belo president and CEO Dunia Shive added, "This is an outstanding and financially compelling transaction for our shareholders."
Belo owns and operates 20 television stations (nine in the top 25 markets) and their associated websites. Gannett, the largest U.S. newspaper publisher by circulation, owns USA TODAY and other newspapers as well as television stations.
The acquisition, unanimously approved by the boards of directors of both companies, will nearly double Gannett's existing portfolio of network affiliates stations, from 23 to 43. The transaction is subject to regulatory and shareholder approval, and customary closing conditions.
Gannett also announced it will replace its existing share buyback initiative with a new program in which it will purchase $300 million of its stock within the next two years. Gannett also said its existing quarterly dividend equal to $0.20 per share will continue.
-- Material from The Associated Press was used in this report.
