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Gray Completes Divestiture Sale Process to Facilitate USD 3.6bn Acquisition of Raycom.

MANews-(C)2009-2018

21 August 2018 - US-based broadcast media company Gray Television, Inc. (NYSE : GTN ) has entered into agreements to sell television stations in eight markets in which both it and pending acquisition target Raycom Media, Inc. currently own television stations, the company said.

Lockwood Broadcasting, Inc. has agreed to purchase Fox affiliates WTNZ in the Knoxvillemarket (DMA 61), WFXG in the Augusta market (DMA 112), WPGX in the Panama City market (DMA 151) and WDFX in the Dothan market (DMA 173).

The E.W. Scripps Company has agreed to purchase ABC affiliates KXXV/KRHD in the Wacomarket (DMA 86) and WTXL in the Tallahassee market (DMA 108).

Tegna Inc. has agreed to purchase CBS affiliate WTOL in the Toledo market (DMA 78) and NBC affiliate KWES in the Odessa-Midland market (DMA 144).

Last week, Gray announced that it had reached an agreement to sell its CBS affiliate, WSWG, in the ninth of the nine Gray/Raycom overlap markets, Albany, Georgia, to Marquee Broadcasting, Inc.

The combined purchase price for all nine divestitures is USD 235.5m, which exceeds Gray's internal projections for divestiture proceeds.

By divesting television stations in each of the nine overlap markets, Gray ensures that the Gray/Raycom combination will not reduce competition in those local markets and otherwise complies with regulatory requirements.

Gray will not have any joint sales, joint retransmission, shared services, or local marketing arrangements with any divested station.

Additionally, Gray will not hold an option to repurchase any divested station, nor will Gray finance or guarantee any purchaser's indebtedness. In short, following consummation of the transactions, the divested stations will operate independently of Gray and under the full control of their new owners.

The proposed divestitures will close concurrently with the closing of the Gray/Raycom transaction, which Gray anticipates will occur following the receipt of regulatory and other approvals in 4Q18.

In June, Gray Television and Raycom Media entered into an agreement to combine their companies in a transaction that will create the single largest owner of top-rated local television stations and digital assets in the country.

Under the terms of the merger agreement between the parties, Gray will acquire Raycom for USD 3.647bn in total proceeds, consisting of USD 3.547bn in enterprise value and USD 100m of Raycom cash.

The consideration will consist of USD 2.85bn in cash, USD 650m in a new series of preferred stock, and 11.5m shares of Gray common stock.

This transaction marks Gray's transformation from a small, regional broadcaster into a media company with nationwide scale.

Upon the closing, Raycom president and CEO, Pat LaPlatney, will become Gray's president and co-chief executive officer.

In addition, LaPlatney and Raycom's former president and CEO, Paul McTear, both of whom are currently members of Raycom's board of directors, will join Gray's board of directors.

At that time, Hilton Howell will become Executive chairman and Co-chief executive officer of Gray.

The transaction is subject to customary closing conditions and regulatory approvals. The parties expect to close the transaction in 4Q18.

The combination will have 142 full-power television stations serving 92 markets.

Its station portfolio that reaches 24% of US television households, ranging from large markets such as Tampa-Sarasota, Cleveland, and Charlotte, to some of the smallest markets like Ottumwa, Fairbanks, Presque Isle and North Platte.

Gray expects that the Raycom transaction will be substantially accretive on a free cash flow per share basis.

Wells Fargo has underwritten the debt financing portion of the transaction in the amount of USD 2.525bn. Gray's existing Term Loan B and Senior Unsecured notes will remain in place.

Wells Fargo Securities, LLC served as financial advisor and Cooley LLP and Jones Day served as legal counsel for Gray. Stonebridge Capital served as financial advisor and Robinson Bradshaw and Covington and Burling served as legal counsel for Raycom.

Country: USA

Sector: Media

Target: Raycom Media, Inc

Buyer: Gray Television

Vendor:

Deal size in USD: 3.6bn

Type: Corporate Acquisition

Financing: Cash and Stock

Status: Agreed

Buyer advisor: Wells Fargo Securities , Cooley , Jones Day

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Publication:M & A Navigator
Date:Aug 21, 2018
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