Media General Inc. is merging with another broadcasting company in a deal that will give the company ownership of a Richmond television station while ending its dual-class stock ownership structure.
Richmond-based Media General, which owns 18 television stations mostly in the Southeast, will seek approval from its shareholders for the all-stock merger with New Young Broadcasting Holding Co. of Nashville, Tenn., a privately held company that owns 12 television stations.
One of New Young Broadcasting’s stations is WRIC-Channel 8 in Richmond.
The combined company will have 30 stations across 27 U.S. markets, reaching 14 percent of U.S. television households, with revenue of more than $600 million, the companies said.
The new company will keep the Media General name, and its headquarters will remain in downtown Richmond. The merger is expected to close in the late third or early fourth quarter of this year.
But the Bryan family of Richmond will no longer control the direction of Media General, as it has since the company’s shares began trading publicly in the mid-1960s. J Stewart Bryan III is Media General’s chairman.
Media General shares soared 33.7 percent, or $2.46, to close Thursday at $9.76 on the New York Stock Exchange.
The deal comes a year after Media General sold the Richmond Times-Dispatch and 62 other publications to Berkshire Hathaway Inc., transforming Media General into a purely broadcasting and digital media company.
“We look at this as a perfect marriage between two like-minded broadcasters,” said George L. Mahoney, Media General’s president and chief executive officer, who will remain in that role with the combined company.
“By like-minded, I mean they care a lot about news, investigative journalism, and the communities they serve,” he said. “Media General has always prided itself on being a news organization, and that carries through today to our television stations. New Young’s television stations are exactly the same in their approach to their communities.
“The more we talked with the Young people, the more we liked this transaction,” he said.
The merger means WRIC-Channel 8 will be owned by Media General, which despite being based here does not have a television station in the Richmond region. Media General briefly owned WTVR-Channel 6 in 1997 but had to sell that station because of federal laws prohibiting one company owning a TV station and a newspaper in the same market.
“I’m particularly pleased that we have WRIC-Channel 8 in Richmond, and that Media General will now have a local broadcaster in its home market,” Mahoney said. “We see all sorts of opportunities.”
Company officials said the deal also improves Media General’s balance sheet and will allow the company to refinance its debt at a lower cost.
Media General’s outstanding debt load of $601 million has been a problem for the company, contributing to its decision last year to sell all of its newspapers.
New Young’s debt load stands at $164 million. The new Media General intends to pursue a total debt refinancing of about $900 million, company officials said.
“We will go out and refinance Media General’s debt and New Young’s debt, and with the combination of the companies we will be able to achieve a lower interest rate on our debt than Media General by itself would have been able to achieve,” Mahoney said.
The merger “resolves several issues for Media General,” said Edward Atorino, a media industry analyst at Benchmark Co. in New York.
“Doing a deal like this increases their scale, solves their debt problem and puts them on a whole different map,” Atorino said.
The merger comes amid a growing number of consolidations among local television broadcasting companies as they look to adapt to changing consumer habits that have driven more advertising toward online and digital media.
For instance, Sinclair Broadcast Group Inc., which owns WRLH-Channel 35 in Richmond, has spent more than $1.84 billion in the past two years buying local outlets, expanding its reach to 34 percent of U.S. households, according to Bloomberg News.
Consolidations to reduce costs and combine resources “make sense in an industry that is stretching to find new revenues,” said Ken Doctor, a media analyst with investment research firm Outsell Inc.
“A lot of these companies’ revenues, other than in election years, are fairly flat,” he said. “They depend heavily on automotive advertising and a lot of that is moving to the Internet.”
The new Media General’s network affiliations will include 11 CBS-affiliated stations, nine with NBC, seven with ABC and one each with Fox, CW and MNT. Mahoney said New Young’s efforts to draw more digital customers and advertisers was one of the attractive propositions of the deal. “They are investing heavily right now in digital, and specifically they are investing heavily in having digital-only (advertising) sellers on the street,” Mahoney said. “That is something Media General has only started to do in the last 12 months, and we think that is the right approach to the market in order to be able to focus on digital.”
The merger also signals another transformative step in the company’s history.
Bryan and his family now control 85 percent of Media General’s super-voting Class B shares, electing six of the company’s nine board members.
After the merger, however, Media General will no longer have two classes of stock — and the Bryan family will no longer have control of the company.
Bryan said he will vote his shares in favor of unwinding the dual-class stock structure, which Media General has had since the mid-1960s when the company’s stock started trading publically.
Media General will reclassify each outstanding share of its Class A and Class B common stock into one share of a newly created class of Media General common stock, which will be entitled to elect all of Media General’s directors.
Media General also will issue about 60.2 million shares of the new Media General common stock to New Young’s shareholders, with an estimated 89.1 million total shares outstanding after closing. Media General shareholders will own 32.5 percent of the merged company, and New Young shareholders will own 67.5 percent.
The merger also will reduce the ownership percentage of current Media General shareholders. “Everyone will have a smaller piece of a bigger pie,” Mahoney said. For instance, Bryan will hold roughly 1 million shares in the combined company. Berkshire Hathaway’s 17 percent stake in Media General’s Class A shares will be reduced to the “single digits” in the new Media General, Mahoney said.
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