Gray pens $925M acquisition deal for Quincy Media

Gray Television Inc. agreed to buy Quincy Media Inc. for $925 million in cash.

Following deal closure, Gray will own TV stations serving 102 TV markets that collectively reach 25.4% of U.S. TV households, the broadcast company said in a press release.

The TV stations that Gray will acquire are WPTA and WISE in Fort Wayne, Ind.; KBJR and KDLH in Duluth, Minn.; WEEK in Peoria, Ill.;WREX in Rockford, Ill.; KTIV in Sioux City, Iowa; KTTC in Rochester-Mason City, Minn.-Iowa; WBNG in Binghamton, N.Y; WVVA in Bluefield-Beckley, W.Va.; and WGEM in Quincy, Ill.

The broadcast company will also acquire WSJV in South Bend, Ind., and WGEM(AM)/-FM in Quincy, Ill.

Gray will not acquire Quincy's newspaper operations, which will be divested before the completion of Quincy's acquisition. Deal closure is likely to occur following receipt of regulatory and other approvals in the second or third quarter of 2021.

The boards of both Gray and Quincy unanimously approved the deal. No Gray shareholder vote will be required.

Gray expects that the Quincy transaction will be immediately accretive to Gray's free cash flow per share. Including anticipated year-one annualized synergies of nearly $23 million, the transaction purchase price represents a multiple of about 6.9x a blended average of Quincy's 2019/2020 EBITDA, the company said.

Gray plans to fund the deal, net of divestiture proceeds, with cash on hand and/or new debt. Wells Fargo offered a debt financing commitment for an incremental loan to finance up to the full purchase price of $925 million.

Gray expects that its anticipated strong free cash flow generation throughout 2021 should allow Gray to continue to deleverage its capital structure following the closing. In addition, it expects its total leverage ratio, net of all cash and net of proceeds from divestiture sales, to be about 4x trailing eight-quarter operating cash flow, including estimated synergies, at year-end 2021.

To facilitate prompt regulatory approvals, Gray elected to divest Quincy's TV stations in markets that Gray also owns a full-power TV station. The markets are Tucson, Ariz.; Madison, Wis.; Cedar Rapids, Iowa; Paducah-Harrisburg, Ky-Ill.; La Crosse-Eau Claire, Wis.; and Wausau-Stevens Point, Wis.

Wells Fargo Securities is due to start a formal process to market the divestiture stations to qualified third parties. The divestitures may take the form of cash sales, swaps involving other TV stations, or a combination of cash and swaps.

Wells Fargo Securities acted as financial adviser to Quincy. Cooley LLP acted as primary legal counsel for Gray. Brooks Pierce McLendon Humphrey & Leonard LLP and Scholz Loos Palmer Siebers and Duesterhaus LLP served as legal counsel for Quincy.

Quincy, Ill.-headquartered Quincy Media is a family-owned media company that owns and operates TV stations and local digital platforms in 16 markets primarily in the Midwest.