Gray Television (GTN) Shares Rally on Schurz Communication Acquisition

Shares of Gray Television Inc. (GTN) were trading up +1.26 or +10.73 percent to $13.00 per share in this morning’s premarket after the company announced late Monday that it had agreed to acquire all television and radio stations owned by Schurz Communications Inc. for $442.5 million. Gray Television stock closed at $11.74 per share, up +0.59 or +5.29 percent in Monday’s regular trading session.

Atlanta, Georgia based Gray Television, Inc. was founded in 1946 as Gray Communications Systems by James Harrison Gray.
The company has since expanded, operating 77 television stations in 44 television markets. 76 of the company’s stations are affiliates of the Big Four networks, ABC, CBS, NBC and Fox. Out of the 44 television markets, Gray Television operates the number one station in 28 of those markets reaching more than 8 percent of total television households in the United States.

Originally founded in 1872 as the South Bend Tribune by Alfred Miller and Elmer Crockett, Mishawaka, Indiana based Schurz Communication is a privately owned diversified media company, which owns television stations, radio stations and daily and weekly publications. The company continues to be operated by the descendants of the original founders.

Gray agreed to acquire all of Schurz’s radio and television properties for approximately $442.5 million including working capital upon closing. The Schurz television properties to be acquired by Gray include stations in Augusta, Georgia, Anchorage, Alaska, Rapid City, South Dakota, South Bend, Indiana, Roanoke-Lynchburg, Virginia, Springfield Missouri and Wichita, Kansas. The Schurz radio stations that will be purchased include top ranked radio stations in South Bend and Lafayette, Indiana and Rapid City, South Dakota.

Gray’s President and Chief Executive Officer, Hilton H. Howell, Jr. said in the company’s press release that, “Today is a momentous day in Gray's 118-year history. Through the Schurz transaction, we will significantly expand the quality of our portfolio of leading television stations. We welcome more dedicated reporters, account executives, and technologists to our growing family. Quite simply, Gray's existing stations will make the Schurz stations stronger, while the Schurz stations will make our existing stations better.”

The transaction will expand Gray’s operations to a total of 49 television markets in 28 United States, providing Gray with the top rated television stations in five additional markets and bringing Gray’s total number one ranked stations to 39. The total number of number one and number two ranked stations owned by Gray will come to 48 out of 49 markets after the deal.

Gray expects the Schurz deal to be immediately accretive to Gray’s cash flow. With the expected synergies, the transaction purchase price represents a multiple of about 7.1times an average of the television stations’ 2015-2016 pro forma cash flow.

The deal will be financed with Gray’s cash on hand and other additional borrowings, with expected strong cash flows through the closing of all announced transactions and through 2016. Gray expects the total leverage ratio of the deal to be about 5.5 times on a trailing eight quarter basis. Investors are optimistic indicated by the increase in Gray stock, both in yesterday’s aftermarket and in this morning’s premarket.

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Published on Sep 15, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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