Meredith Corporation started out the week with a $2.7 billion deal. On Monday, the company announced that it is selling its television business segment, known as Local Media Group (LMG), to Gray Television, Inc. for $2.7 billion in an all-cash deal. LMG includes 17 television stations reaching 30 million viewers and 11% of all U.S. households. Meredith owns seven stations in the country’s top 25 markets including Atlanta, Phoenix, St. Louis and Portland and 13 stations in the top 50. Currently, Gray operates in 94 U.S. markets. After acquiring LMG, Gray will operate in 102 markets, reaching 25.4% of U.S. households.

Upon completion of the deal, Meredith’s National Media Group will spin off, becoming a standalone, publicly-traded company under the name Meredith Corporation. Remaining headquartered in Des Moines, Iowa, the newly organized company will be separated into two business segments: digital and magazine. Tom Harty, chairman and CEO, will continue to lead the company.

Shareholders will receive cash consideration of approximately $14.50 per share in a 1-for-1 equity share. The deal was unanimously approved by Meredith’s and Gray’s boards. The deal must be approved by Meredith Corporation shareholders and is subject to customary closing conditions and regulatory approvals. The deal is expected to close in the fourth quarter of the 2021 calendar year.

Focus on publishing and brands

Instead of dividing its interests between broadcast and publishing, the company will focus solely on its digital and magazine platforms and national brands including PEOPLE, Better Homes & Gardens, Southern Living, REAL SIMPLE and Allrecipes. Meredith is the number 1 magazine publisher in the United States with over 36 million subscribers and the number 2 global licensor of its brands.

“We expect the transaction to unlock meaningful shareholder value as it advances all of the company's financial priorities: reducing net debt, improving financial flexibility, allocating capital to fast-growing digital and consumer opportunities, and providing returns to shareholders,” said Harty in a May 3, 2021 statement. “As a more focused company with an enhanced balance sheet and cash-generating media assets, we will further advance our position as a media leader with trusted brands, a digital business of scale, and unparalleled reach to women.”

Strategy behind the decision

According to Meredith’s statement, there are five key strategic reasons for the deal with Gray Television:

1. The $2.7 billion sale monetizes LMG at a premium price at the right time.
2. The new structure allows Meredith to pay off its debt.
3. The deal will significantly improve Meredith’s financial strength, providing the company with financial flexibility and good capital returns for shareholders.
4. Shareholders will receive a one-time payment in cash plus one-for-one equity in Meredith going forward.
5. The deal allows Meredith to focus on being a consumer-focused, lifestyle media company on both magazine and digital platforms.

Mell Meredith Frazier, vice chair of Meredith’s board of directors, commented on the deal: “We address the fundamental passions and concerns that women and families face every day, creating sought-after content that millions of Americans across generations have grown to know, love, and trust. We understand the trends and products that consumers crave better than any other media company, and we are incredibly proud and committed to keeping Meredith a thriving enterprise as dynamic as the lives our consumers lead.”

“Great strategic fit”

Why Gray Television? Meredith said it is a great strategic fit.

“We believe the scale made possible by the combination of the Local Media Group with Gray Television represents a great strategic fit, and we are incredibly grateful to our colleagues for their years of dedicated service and industry-leading work. Our broadcast stations have been an important piece of Meredith's history for nearly 75 years and have become integral to the communities they serve, providing outstanding coverage, local insight, and strong advertiser partnerships,” Harty added.

Insider Take

Aside from the multi-billion-dollar price tag, this is a huge deal for Meredith. They get out from under $2.6 billion in debt, and they can focus on where they really want to be – in both digital and magazine platforms – while providing shareholder value and an achievable long-term vision for the future. The company will get to focus on what it is already doing well and strengthening their financial position at the same time. Everyone wins in this scenario. Well done, Meredith.