Meredith, the 113-year-old Des Moines, Iowa-based publisher of Better Homes and Gardens, Family Circle and Martha Stewart Living, has had chances over the past few years to become the world’s biggest magazine company by combining with most of Time Inc. or buying it outright.
But Meredith’s executives have now decided that it would be much more fun to run a local television company. And really, who can blame them?
Thanks in large part to the campaign spending flood unleashed in 2010 by the Supreme Court’s landmark Citizens United ruling and the D.C. Circuit Court of Appeals’ SpeechNOW.org decision, local broadcast television remains that rare legacy media business where things are still looking up. Political advertising spending on TV is projected to hit $4.4 billion in the 2016 election cycle, up from $3.8 billion in 2012, according to Kantar Media’s Campaign Media Analysis Group, with about three-quarters of that going to local broadcast stations.
Meredith, which got about a third of its revenue and 59 percent of its operating income in its last fiscal year from the 17 local stations it already owns, isn’t getting rid of the magazines, at least not yet. But it is combining with Media General, a former newspaper publisher (its flagship was the Richmond Times-Dispatch) with an even bigger local TV footprint. Technically Media General is acquiring Meredith, but Meredith’s top executives will be in charge of the merged company and, well, I’ll let Bloomberg’s Gerry Smith, Amy Thomson and Tom Lavell explain:
The deal looks almost like a leveraged buyout. JPMorgan Chase & Co. and RBC Capital Markets have committed $2.8 billion to back the transaction, which dwarfs the equity value of the merger. Initially, the funding would boost the new company’s net debt to almost 5.5 times a measure of its earnings, although the companies said it expects to decrease that leverage to between 3 and 3.5 times earnings within two years.