TEGNA Acquires KFMB Stations From Midwest Television
The deal marks a return to radio for TEGNA, as then part of Gannett it previously sold its remaining radio holdings to Evergreen Media in 1997. The radio stations are secondary to gaining the CBS and CW television affiliates in the San Diego market, but does not necessarily mean they will seek to divest the stations. Just as Hearst has with WBAL/WIYY Baltimore and Sinclair with KOMO/KPLZ Seattle there are existing cost synergies in place that may be worth retaining.
TEGNA Inc. (NYSE: TGNA) and Midwest Television, Inc. jointly announced today they have entered into a definitive agreement under which TEGNA will acquire, for $325 million in cash, KFMB-TV, the CBS affiliated station in San Diego, KFMB-D2 (CW) and radio broadcast stations KFMB-AM and KFMB-FM in San Diego.
Through this transaction, TEGNA adds a strong market to its portfolio of big four affiliates in top markets. San Diego is the 29th largest U.S. TV market with 1.1 million households and the 17th largest radio market. KFMB-TV is the long-standing market leader in San Diego. It leads the market in audience ratings and share across all demographics and is number one in news across all major time slots. KFMB-D2, The CW San Diego, operates as a digital subchannel of KFMB. KFMB-TV and KFMB-D2 share studio facilities in the Kearny Mesa section of San Diego with KFMB 760 AM talk radio and KFMB-FM, which offers an adult rock hits format.
“This is a marriage of two great broadcasting cultures. We have long admired our dedicated colleagues in San Diego and look forward to continuing the stations’ high-quality journalism, editorial independence and commitment to their local community,” said Dave Lougee, president and CEO, TEGNA. “We have a proven ability to be a strategic and disciplined consolidator with a track record of acquiring profitable businesses at an attractive, accretive valuation. Looking ahead, we will continue to evaluate additional investments and select transactions to build on our growth and success with a focus on creating shareholder value.”
Commenting on the transaction, Elisabeth Kimmel, Midwest Television, Inc.’s president and owner said, “This transaction is a testament to the outstanding value our employees have created serving the San Diego community. Having owned these properties for over 55 years, our family believed it imperative to find an excellent steward for television and radio stations that the community has embraced as part of the fabric of San Diego. We have found such a partner in TEGNA, an innovative media company that shares our commitment to the highest levels of journalistic integrity and serving the greater good of the community. We welcome TEGNA to San Diego with the knowledge that their values, resources and community leadership will serve our employees, consumers and customers for decades to come.”
TEGNA’s resources will provide an enhanced level of innovation to San Diego consumers and advertisers, driven by industry-leading audience and advertiser-focused initiatives. TEGNA will achieve synergies driven by mechanical revenue and cost efficiencies.
The transaction, structured as an asset purchase, represents an attractive purchase price multiple of 6.6 times average expected 2017/2018 EBITDA, including expected run rate synergies and tax benefits. TEGNA expects the transaction to be accretive to EPS by a few cents within the first 12 months after close, and immediately accretive to free cash flow.
TEGNA will finance the transaction through the use of available cash and borrowing under its existing credit facility. The acquisition is subject to customary regulatory approvals and closing conditions, and is expected to close in the first quarter of 2018.