Television station operator Sinclair Broadcast Group Inc (SBGI.O) said it would buy Fisher Communications Inc FSCI.O for about $373 million to expand its operations in the western United States.
The offer values Seattle-based Fisher Communications at $41 per share, a premium of 5 percent to the stock's closing price on Wednesday.
The stock, which rose to a five-year high of $41.09 on Thursday, is now trading 44 percent above its close on January 9 -- the day before Fisher, under pressure from billionaire investor Mario Gabelli, said it was considering putting itself up for sale.
"This is a major opportunity for Sinclair to move into two top-25 markets," Gabelli, whose 26.75 percent stake in Fisher makes him the company's largest shareholder, told Reuters.
Seattle-Tacoma and Portland -- key markets for Fisher -- are ranked 12th and 22nd respectively by Nielsen's 2011-12 local television market report. (link.reuters.com/ryq37t)
A Television Market Area, or TMA, is a group of U.S. counties covered by a specific group of television stations.
Sinclair said in a statement it expected to finance the acquisition with cash on hand and debt. It might also raise funds from capital markets, the company said.
On completion of the deal, Sinclair would be able to reach more than a third of U.S. households with a television. The company's shares rose 6.5 percent to $23.94, their highest since 1998.
"We are excited to acquire Fisher and expand our coverage westward, especially in the two key markets of Seattle and Portland," Chief Executive David Smith said in the statement.
Sinclair's television group, which includes 27 FOX, 17 ABC, 15 CBS and 11 NBC affiliates, already reaches about 30 percent of U.S. television households, according to the company's website. (link.reuters.com/geq37t)
Fisher owns 20 television stations in eight markets and three radio stations. It runs CBS and ABC affiliates such as KPIC TV, KCBY TV and KATU TV.
Evercore Partners analyst Doug Arthur said Sinclair had secured cheap financing for a series of acquisitions over the last 18 months.
"They've generally been very accretive, and that's why the stock's up," he said. "They've been very good at squeezing costs out and making underlying operating improvements."
Sinclair bought four television stations owned by COX Media Group for $99.0 million in February and six stations from Newport Television in July 2012.
It also bought 15 stations from Freedom Communications and Four Points Media for a combined $585 million in November 2011.
When Fisher announced in January that it was exploring strategic options, Gabelli said that he preferred a leveraged restructuring to the outright sale of the company.
At the time, he proposed the creation of a new company that could buy Fisher for $40 per share by issuing bonds to shareholders, and then distribute $36 in cash and one share of the new company to each Fisher shareholder.
Asked about the sale on Thursday, he said: "I don't have a point of view."
Arthur, the analyst, ruled out the possibility of a higher bid for Fisher. "I think this is a done deal," he said.
(Additional reporting by A. Ananthalakshmi in Bangalore; Editing by Sriraj Kalluvila)