Marci Ryvicker of Wells Fargo noted that the deal between the two media companies was a surprise and unique in that it is not an indication that Gannett will continue to be an active M&A entity in the immediate future.
Despite the statement that it was not particularly looking for more acquisitions, officials said in a conference call that one should “never say never.”
The addition of Belo’s income to Gannett will make television its primary business, taking it just over the 50% mark.
Gannett said it expected $175M in synergies within three years, and Ryvicker reported that $75M is “locked and loaded” to benefit right away in the first year.
She noted that Gannett has not yet started paying reverse compensation to the networks, but Belo is already with that particular program.
The final analysis: “What a surprise! And REALLY good for valuations. For two companies who have not been much involved in M&A, we were (positively) surprised by this morning’s announcement. Our ‘gut’ told us BLC was a net seller of assets, but we are very surprised at how quickly Stage 3 consolidation has fallen upon us. Better yet, thinking about the rest of our coverage, if we were to apply the ~9.4x fair market multiple (2013E/2014E EBITDA) to NXST, SBGI, TVL and GTN, we get stock price valuations of $50, $35, $26, and $7, respectively–and this is before any additional M&A.”