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Gray spinning off newspapers

First it was Viacom, then Clear Channel. Now it's Gray Television splitting itself into two companies. Gray, which had previously changed its name from Gray Communications, announced that it is spinning off its non-TV businesses - - its five daily newspapers and Graylink Wireless - - into a new company to be called Triple Crown Media. Immediately after the split, Bull Run Corporation - - a sports marketing company that used to be Gray's main shareholder - - will be merged into Triple Crown Media. Current Gray shareholders, both common and Class A, will receive one share of Triple Crown common stock for every 10 Gray shares they own. Bull Run shareholders will receive 0.0289 Triple Crown shares for each Bull Run share. J. Mack Robinson is Chairman and CEO of Gray and Chairman of Bull Run. When the spin-off takes place, Triple Crown will distribute 40 million in cash to Gray, which Gray will use to reduce its outstanding debt. Bull Run shareholders still have to vote on the deal, but Gray says no vote by its shareholders is required. The spin-off will be discussed in Gray's quarterly conference call next week (8/8). For now, here's how Gray says it will all work out.


Gray Television, Inc. (NYSE: GTN; GTN.A) today announced that its Board of Directors has approved a plan to spin-off its Newspaper Publishing and Graylink Wireless businesses to its shareholders, which will result in a newly created and separately traded public company named Triple Crown Media, Inc. Gray expects that as a result of the spin-off, both Gray and Triple Crown Media will be better able to focus financial and operational resources on its own business and executing its own strategic plan. In addition, Gray believes that both Gray and Triple Crown Media will have greater strategic and financial flexibility to support future growth opportunities.

Gray and Bull Run Corporation (OTC: BULL) also today announced a definitive agreement to merge Bull Run into Triple Crown Media immediately following the spin-off. This agreement is subject to certain closing conditions, including an affirmative vote of Bull Run's shareholders. Triple Crown Media will soon file a registration statement with the Securities and Exchange Commission which will describe the spin-off and merger.

Gray's Newspaper Publishing business consists of five daily newspapers with total daily circulation of approximately 120,000 and Sunday circulation of approximately 160,000. Gray's GrayLink Wireless business is a leading provider of primarily paging and other wireless services in non-major metropolitan areas in Alabama, Florida and Georgia, where it also operates 14 retail locations.

Upon completion of the spin-off, each common shareholder of Gray will receive as a dividend one share of common stock of Triple Crown Media for every 10 shares of Gray common stock and for every 10 shares of Gray class A common stock. No Gray shareholder vote will be required to effect the spin- off, and no consideration will be required to be paid by Gray's shareholders to receive the common stock of Triple Crown Media. On the date of the spin- off, Triple Crown Media will distribute $40 million to Gray, which Gray intends to use to reduce its outstanding indebtedness.

Immediately following the spin-off, it is planned that Bull Run will be merged with and into a wholly owned subsidiary of Triple Crown Media. In the merger, Bull Run common shareholders will receive 0.0289 shares of Triple Crown Media for each share of Bull Run common stock held. In the merger, Bull Run preferred stock held by non-affiliated holders will be redeemed for its current redemption value. Holders of preferred stock and other loans to Bull Run who are affiliates of Bull Run, including J. Mack Robinson, the current Chairman and Chief Executive Officer of Gray and Chairman of the Board of Bull Run, will receive shares of Triple Crown Media common stock in exchange for shares of Bull Run series F preferred stock and accrued and unpaid dividends thereon; shares of Triple Crown Media series A preferred stock in exchange for shares of Bull Run series D and series E preferred stocks and accrued and unpaid dividends thereon; and shares of Triple Crown Media series B preferred stock in exchange for cash previously advanced to Bull Run. On a combined basis, after the merger, current shareholders of Gray will own approximately 95% of the outstanding common stock of Triple Crown Media and certain holders of Bull Run preferred stock and current holders of Bull Run common stock will hold the remaining 5%. Triple Crown Media has received a long-term financing commitment from bank lenders that will accommodate the payment of the distribution to Gray and the refinancing of all of Bull Run's bank and subordinated indebtedness.

Purpose of the Transactions

Triple Crown Media will combine Gray's Newspaper Publishing and Graylink Wireless businesses with Bull Run's sole operating business, Host Communications, Inc., under the leadership of Thomas J. Stultz, current Chief Executive Officer of Host, and the former President of Gray's Newspaper Publishing business. Over the past twelve months, on a combined basis, Triple Crown Media would have had net revenue of approximately $115 million.

"We believe the spin-off is a very intelligent way to separate our businesses in a tax-efficient manner that allows our broadcasting and Newspaper Publishing businesses to maximize their strategic objectives, and by combining with Bull Run, Triple Crown Media will benefit from the proven leadership of Tom Stultz, and combine complementary businesses. In addition, the transactions avoid the incurrence of significant standalone costs that Triple Crown Media would need to incur were it spun off in a standalone transaction." commented Robert S. Prather, Jr., President of Gray Television.

Thomas J. Stultz, President and CEO of Host Communications and former President of Gray's Newspaper Publishing business, stated, "I am very excited about the prospects of combining the revenue from the Newspaper Publishing and Graylink Wireless businesses with the growth potential we have with Host. This will be a great combination of businesses that complement one another and will serve to accelerate the growth in each of these businesses beyond what they could achieve independently."

Following the transaction, Thomas J. Stultz will serve as Chief Executive, President and a director of Triple Crown Media. During Mr. Stultz's prior tenure as President of Gray's Newspaper Publishing business, the business grew from three newspapers with revenues of approximately $21.9 million in 1995 to five newspapers with revenues of approximately $44.8 million in 2004. In his short tenure at Bull Run, the turnaround of the business has produced significant growth in net revenues and operating income. Frederick J. Erickson, current Bull Run Chief Financial Officer, will serve as CFO of Triple Crown Media.

With respect to the transactions described above Banc of America Securities LLC has acted as a financial advisor to Gray; Houlihan Lokey Howard & Zukin Financial Advisors, Inc., has acted as a financial advisor to the special committee of the Board of Directors of Triple Crown Media, Inc. and SunTrust Robinson Humphrey has acted as a financial advisor to Bull Run.


TVBR observation:
Gray Television's five daily newspapers are well run and produce decent cash flow, but, let's face it, Wall Street doesn't really care. It treats Gray, with its 31 TV stations, as a pure play TV company. It makes sense to send the newspapers off on their own with the paging business and Host Communications, Bull Run's sports marketing business, to tell their own story to investors.


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