Media General spins off newspapers


DealDespite positive Q1 revenue results delivered by the Media General television wing, the company’s bottom line was negative. And that’s why it’s selling off its print division.

Berkshire Hathaway’s BH Media Group will pay $142M for all but Media General’s Tampa-St. Petersburg print properties, getting 63 daily and weekly titles distributed in the states of Virginia, North Carolina, South Carolina and Alabama.

In addition, Berkshire will provide MG with a $400M term loan and a $45M revolver. The term loan will clear out MG’s bank debt, which is due in March 2013.

Negotiations to divest the Tampa print properties with other potential buyers are said to be in progress.

Media General President/CEO Marshall N. Morton commented, “Selling our newspapers represents a monumental change for us. We’re very happy that our newspapers will become part of Berkshire Hathaway’s BH Media Group, a company with a strong commitment to local news leadership and community engagement. This single transaction for virtually all of our newspapers accelerates the timing of our strategy to focus on our broadcast television business and its future growth opportunities, including digital content and Mobile DTV.”

MG noted that TV brought in 77% of its Platform Cash Flow during 2011, and that increased to 87% during Q1 2012. It is looking for a strong year, capitalizing on television properties in several fiercely contested presidential battleground states including Ohio, Florida, Virginia and North Carolina.

Additionally, its strong NBC contingent has already benefitted from the Super Bowl and is looking forward to further benefits when the Summer Olympics kick off. It is further expecting retransmission income to increase from $21M in 2011 to between $32M-$37M in 2012.

The deal brings the MG newspapers into the Warren Buffet universe. “In towns and cities where there is a strong sense of community, there is no more important institution than the local paper,” he said. “The many locales served by the newspapers we are acquiring fall firmly in this mold and we are delighted they have found a permanent home with Berkshire Hathaway.”

Added BH Media Group President Terry Kroeger, “These newspapers are great institutions and powerful brands in their respective markets. We are honored to have the opportunity to work with our new colleagues as we continue to produce top-notch news and advertising products in both print and digital platforms.”

Media General summarized its new look, stating, “Following the sale of newspapers to Berkshire Hathaway, the company’s operations will include 18 network-affiliated television stations and their associated websites. Media General owns eight NBC affiliates, eight CBS, one ABC and one CW. Six of its stations operate in the Top 40 markets in the United States, including WFLA-TV in Tampa, Florida, the country’s 14th largest DMA. Media General’s stations reach more than one-third of TV households in the Southeast and more than 8 percent of U.S. TV households. Media General expects to enter into a transaction with one of several prospective buyers for its Tampa, Florida print properties.”

RBR-TVBR observation: Wow – you have to love this deal. MG gets rid of the portfolio segment with the most troubled future and deals with ongoing financial matters all at once. This looks like a homerun to us.

It is also interesting from a regulatory standpoint. Just as it seems the FCC is ready to sign off on at least some loosening of cross-ownership restrictions, here we have a company that is actually splitting up existing cross-owned operations.

As we’ve noted in the past, while synergies and efficiencies between two television stations are fairly obvious, perhaps similar opportunities between broadcast and newspaper aren’t all they are sometimes cracked up to be.