In an unexpected development, Gray Television, Inc. has revised its proposal to buy Meredith Corporation’s broadcast TV business, Local Media Group, from $2.7 billion to $2.825 billion. In early May, the two companies agreed on a price of $14.50 per share in cash for shareholders as well as a one-for-one equity share in Meredith after the sale was complete. The revised merger agreement increases the price to $16.99 per share. As of 4:18 p.m. Eastern yesterday, Meredith’s stock (NYSE: MDP) was valued at $39.47 per share. On May 3, Meredith’s stock was valued at $35.21 per share. (Source: Google)
Following the announcement of the deal, Meredith received an unsolicited proposal from another buyer, but Meredith has not disclosed the name of the buyer. Meredith’s board of directors considered both the competing proposals and the risks and benefits of each one. They unanimously approved Gray’s revised proposal. The deal is expected to close in the fourth quarter of 2021, subject to customary closing conditions and regulatory approvals.
Gray’s reach to grow to more than 25% of U.S. households
Meredith’s Local Media Group 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.
Meredith shifts focus to publishing and brands
Over the years, Meredith has identified what it does well and that is serving consumers as a lifestyle style media company that publishes magazines – print and digital – and grows brands like PEOPLE, Better Homes & Gardens, Southern Living, REAL SIMPLE and Allrecipes. Like other companies, Meredith is diversifying its revenue streams and leveraging its brands.
In recent years, the company has expanded into branded merchandise like Southern Living’s book and food lines, Magnolia branded merchandise like clothing and home décor and the Magnolia candle subscription, beauty boxes (SHAPE), and bookazines like the quarterly publication, PEOPLE Royals, which launched in March. Just last week, the company announced that PEOPLE will launch a weekly podcast focused on PEOPLE and the stars and stories of the 1990s. It also announced that REAL SIMPLE will debut a new handbag collection focused on style and functionality.
Meredith is the number 1 magazine operator in the U.S. with 36 million subscribers. Through its digital platforms, the company’s brands reach more than 150 million consumers each month, 95% of them female.
In a May 3, 2021 statement, Harty said, “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.”
“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,” said Mell Meredith Frazier, vice chair of Meredith’s board of directors.
Insider Take
From a number of perspectives, this spin-off is a solid move for Meredith. They get to pay off some debt while honoring their commitment and fiduciary responsibility to shareholders. They can also focus on their strengths and leverage them to grow the company and their brands. Gray, while having to spend a little more money than planned, can grow its market share and expand its reach in television markets across the country.
