TEGNA to Buy Midwest Television's Broadcasting Stations

TEGNA Inc. TGNA has inked a deal to acquire the broadcasting stations of Midwest Television, Inc. for $325 million in cash. Following this announcement, shares of TEGNA rose 3.45% to $14.09 on Dec 18.

TEGNA will fund the transaction through available cash and borrowing under its existing credit facility. Subject to customary regulatory approvals and closing conditions, the buyout is expected to close in the first quarter of 2018.

The deal’s value is equivalent to 6.6 times of average expected 2017/2018 EBITDA. This will further include expected run rate savings and tax benefits. The deal is expected to boost TEGNA’s free cash flow on an immediate basis and drive the bottom line by a few cents within a year.

Television stations — KFMB-TV and KFMB-D2 (CW) — and radio broadcast stations — KFMB-AM and KFMB-FM — will be acquired by TEGNA. The assets will be added to the company’s existing media division. The media division is engaged in content creation rather than TV broadcasting. With 46 television stations in 38 markets, TEGNA delivers relevant content and information to viewers in all platforms. The company is the largest owner of top four affiliates in the top 25 markets, reaching approximately one-third of all television households nationwide.

We believe that the move to buy the San Diego-based company’s broadcasting stations is prudent. Currently, 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 dominant market leader in San Diego, with higher audience ratings. KFMB-D2 is a CW-affiliated television station, which operates as a second digital subchannel of KFMB-TV, and is branded as The CW San Diego. KFMB-AM, KFMB-FM and KFMB-TV share studios in the Kearny Mesa district of San Diego.

In a bid to sustain growth, the company is focused on acquiring other lucrative businesses along with making additional investments to increase shareholder’s wealth.

Zacks Rank & Price Performance

Currently, TEGNA carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

TEGNA portrays an impressive price performance. In the past three months, the stock has returned 10% compared with the industry’s rally of 0.2%.

 

When compared with the market at large, the stock looks favorable, as the S&P 500 index has rallied 7.0%.

Key Picks

A few better-ranked stocks in the Consumer Discretionary sector are Cable One Inc CABO, Imax Corporation IMAX and Netflix, Inc NFLX. All the companies carry a Zacks Rank #2 (Buy).

Cable One, Netflix and Imax portray a decent earnings surprise history, beating the Zacks Consensus Estimate in twoof the last four quarters with an average of 2.6%, 1.25% and 41.3%, respectively.

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