Houston residents may be interested to learn that LIN Media LLC was recently acquired by another media company. The Texas-based television company was acquired by Media General Inc. for $1.6 billion on March 21. The LIN Media LLC is worth about $2.6 billion, including $968 million in debt. The company deal comes out to a level of 10.5 times estimated earnings, which makes it slightly more expensive than recent similar deals in the industry. Shareholders of LIN will be able to take shares in the new company or a cash payment of $27.82 per share, which is a 29 percent premium over the March 20 closing price.
The deal was one of several acquisitions in recent months that was driven in large part by the increased revenue that local television stations are receiving from cable operators. The LIN purchase will give Media General 74 local stations that reach 26.5 million American households. That covers 23 percent of the United States. LIN's chief executive officer will stay on board to lead the newly formed company.
Similar deals have been made in the industry. In the past 12 months, media companies like Media General, Tribune Co. and Gannett Co. have made more than $10 billion in purchases of local television stations. In December, both Tribune and Gannett made deals of more than $1.5 billion. Sinclair Broadcast Group also spent more than $2 billion in acquisitions in the past year.
At some point, nearly every industry sees a wave of consolidation. Those deals can be very lucrative, especially for the company that is being purchased. However, there can be complexities to acquisitions that require serious thought. Leaders of acquired companies will want to address what will happen to their employees, whether relocation will be required and who will lead the newly formed company. An experienced business attorney can negotiate on behalf of a company to make sure all of its interests are protected.
Source: Bloomberg Businessweek, "Media General to Buy LIN for $1.6 Billion in TV Merger Wave (1)", Crayton Harrison, March 21, 2014