Please ensure Javascript is enabled for purposes of website accessibility

Why TEGNA Shares Are Soaring 28% Friday Morning

By Daniel Miller - Mar 6, 2020 at 12:10PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A report has Gray Television offering to acquire TEGNA -- but does the move make sense?

What happened

Shares of TEGNA (TGNA -0.33%), a media company with 62 television stations in 51 markets reaching roughly 39% of television households nationwide, soared 28% Friday morning -- before giving back some gains -- after Gray Television (GTN -1.21%) made an offer to acquire the company.

So what

Gray Television reportedly made a $8.5 billion offer, including debt, to acquire TEGNA, per a Reuters report. Gray Television offered $20 per share in cash and stock for TEGNA, and the move would add even more debt to the company's pile -- it's reported a plan exists to pay down the debt if the deal closes. The move makes sense for Gray Television, as the company operates in 93 television markets covering roughly 24% of U.S. television households, but generally it operates in smaller markets while TEGNA is more focused on larger markets. The combination would make a complimentary and favorable fit. 

Behind the scenes of a broadcasting studio

Image source: Getty Images.

Now what

It must be noted that as of this writing nothing has been officially announced, and there's no guarantee a deal will be completed, despite the pop in TEGNA's stock price. But this is a reminder to investors of the pressure being applied to traditional television and broadcast companies as consumers continue to cut the cord and opt for online streaming options.

TGNA Chart

TGNA data by YCharts

As you can see in the graph above, the pressure facing broadcasting companies has had their stocks treading water over the past five years, and industry consolidation to increase scale could help support their business. If the deal closes, it will be a move in the right direction for both companies, provided the debt can be reduced quickly amid a boost in business from political elections.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Gray Television, Inc. Stock Quote
Gray Television, Inc.
GTN
$17.14 (-1.21%) $0.21
TEGNA Inc. Stock Quote
TEGNA Inc.
TGNA
$20.93 (-0.33%) $0.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
319%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.