Media General Inc MEG.N and privately held New Young Broadcasting Holding Co Inc said they will combine in an all-stock deal to form a new TV broadcasting company that will be majority controlled by New Young shareholders.
Shares of Media General, in which Warren Buffett's Berkshire Hathaway Inc (BRKa.N) (BRKb.N) holds a 17 percent stake, jumped as much as 24 percent in early trading on Thursday.
The new company, with 30 TV stations in 27 U.S. markets, will retain the Media General name. Nashville-based New Young will contribute 12 stations to the new company, which will have revenue of more than $600 million.
Following the merger, the new company will be owned 67.5 percent by New Young shareholders and 32.5 percent by Media General shareholders.
The merger, expected to close in the late third or early fourth quarter of this year, will add to free cash flow in the first full year, the companies said in a statement.
Media General, based in Richmond, Virginia, sold almost all its newspapers to Berkshire Hathaway in May 2012 after years of plummeting advertising revenue and an exodus of readers to digital formats.
Media General exited its nearly two-centuries-old newspaper business in October by selling the Pulitzer-winning Tampa Tribune, becoming a broadcast TV and digital media company.
Media General, which had $601 million in outstanding debt as of March 31 and Young, with a debt of $164 million, plan to pursue a debt refinancing of about $900 million after the merger, the companies said.
RBC Capital Markets LLC and Fried, Frank, Harris, Shriver & Jacobson LLP advised Media General. Wells Fargo Securities LLC and Debevoise & Plimpton LLP advised Young Broadcasting.
Media General shares were up 23 percent at $8.95 in early trading on the New York Stock Exchange. The stock has doubled in value in the past year but were down 14 percent in the month up to Wednesday's close.
(Reporting by Sayantani Ghosh in Bangalore; Editing by Maju Samuel)