May 3, 2021

In a transaction with implications for both the local broadcast and magazine businesses, Gray Television is buying Meredith Corporation’s 17 television stations for $2.7 billion, the two companies announced Monday morning.

Gray will become one of the top three local broadcasters (along with Sinclair and Nexstar) when the deal closes in the fourth quarter of this year.

It continues a yearslong consolidation trend in the profitable local television business, partly driven by the better retransmission deals that station groups can negotiate with cable companies as they gain leverage by growing larger.

For Meredith, the deal will reduce the substantial debt it assumed when it acquired the larger Time Inc. magazine group in November 2018 in a deal valued at $3 billion. The Des Moines-based company said that it will invest in the growth of the magazines and their digital properties. Its titles include People, Better Homes and Gardens and All Recipes.

Meredith sold Time along with Fortune and the Sports Illustrated brand to three separate buyers for $450 million. It explained that hard news was not its specialty.

Though the television group contributed about half of Meredith’s profits in 2020, this sale was not unexpected. The company said in the fall that it had engaged advisers to explore options, typically code for putting all or part up for sale.

As we wrote in October, despite a strong record of management and financial performance, Meredith hit trouble in the Time purchase. Costs of combining the two big companies were higher than expected and revenues less.

Then came the pandemic recession of 2020, which hit the advertising base of Meredith’s lifestyle titles especially hard.

Meredith was vague about its plans of how it will use the $2.7 million beyond paying down its debt of $2.6 billion and reducing its interest costs. The money won’t be in hand for another six months.

“As a more focused company with an enhanced balance sheet and cash-generating media assets,” chairman and CEO Tom Harty said in a press release, “we will further advance our position as a media leader with trusted brands, a digital business of scale, and unparalleled reach to women.” The company claims its titles reach 96% of adult women in the U.S.

“We will invest to accelerate our digital growth and leverage our industry-leading first party data to deepen engagement with consumers across multiple platforms and provide advertising partners with greater value.”

The acquisition is unusual in that Gray will serve 113 local markets, reaching about 36% of U.S. television households. But even with all of those holdings, the Meredith group only includes one market where Gray already owns a station — Flint/Saginaw. Gray will sell WJRT, the ABC affiliate in Flint, before closing. Gray will acquire stations in two big markets — Atlanta and Phoenix — plus a range of middle markets, similar to most of Gray’s holdings. (A full list of the stations Gray will acquire from Meredith is available below.)

Gray Television burst into the top tier of owners when it purchased Raycom in 2018 for $3.6 billion. In the same month, Nexstar bought Tribune Media’s 42 TV stations. Since the pandemic, the flurry of acquisitions had cooled until now. The major roadblock for another round of shopping sprees is the Federal Communications Commission’s national TV ownership rule, which allows a company to own stations serving no more than 39% of all U.S. TV households.

However, the Supreme Court recently ruled that the FCC could loosen the ownership rules, as owners have claimed for years. The justices said that the current ownership limits may be outdated since they were written in a pre-internet era. The future of the rule likely rests in whoever President Joe Biden appoints to a vacant slot on the FCC. The FCC is currently split with two Republican-appointed commissioners, two Democratic-appointed commissioners and one vacancy. The Biden-appointed acting chairwoman opposed lifting the limits.

The stock market appeared to see the transaction as a win-win, with both Gray and Meredith shares up 5% in late morning trading.

Here’s a full list of the stations Gray will acquire:

  • WGCL (CBS) / WPCH (Independent), Atlanta, Georgia
  • KPHO (CBS) / KTVK (Independent), Phoenix, Arizona
  • KPTV (FOX) / KPDX (MyNetwork), Portland, Oregon
  • KMOV (CBS), St. Louis, Missouri
  • WSMV (NBC), Nashville, Tennessee
  • WFSB (CBS), Hartford-New Haven, Connecticut
  • KCTV (CBS) / KSMO (MyNetwork), Kansas City, Missouri
  • WHNS (FOX), Greenville-Spartanburg, South Carolina
  • KVVU (FOX), Las Vegas, Nevada
  • WALA (FOX), Mobile, Alabama
  • WNEM (CBS), Flint-Saginaw, Michigan
  • WGGB (ABC and FOX) / WSHM-LD (CBS), Springfield, Massachusetts
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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
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