Gray Television to buy Raycom Media in $3.65 billion deal

(Reuters) - Gray Television Inc said on Monday it would buy privately held rival broadcaster Raycom Media Inc in a cash-and-stock deal valued at $3.65 billion, in a push into more local television markets and to attract additional advertising.

The combined company, with 142 full-power television stations in 92 markets, will reach about 24 percent of total U.S. television households, more than doubling Gray’s reach.

Shares in Gray jumped 16 percent to close at a four-month high of $14.85.

Gray’s largest deal comes at a time when the U.S. Federal Communications Commission is making it easier for media companies to buy TV stations in the same market, and for local stations to jointly sell advertising time.

In November, the FCC voted to remove certain roadblocks to increased consolidation among media companies, potentially unleashing new deals among TV, radio and newspaper owners as they seek to better compete with online media.

“We believe all the broadcasters could eventually become targets for larger tech or telecom companies over time, especially as content generation increases,” said Daniel Kurnos, an analyst at Benchmark Co.

Another major broadcaster Sinclair Broadcast Group Inc is awaiting approval from FCC and U.S. Justice Department for its $3.9 billion acquisition of Tribune Media Co.

Gray’s offer for Raycom, an employee-owned company, will consist of $2.85 billion in cash, $650 million in a new series of preferred stock, and 11.5 million shares of Gray common stock, the companies said.

Wells Fargo has underwritten $2.53 billion in debt financing for the deal.

The deal will create the third largest portfolio of stations and markets in the United States, Gray said.

Gray said it will divest television stations in each of the nine overlapping markets to get antitrust approval for the deal, which is expected to close in the fourth quarter of 2018.

Raycom plans to sell or spin off Community Newspaper Holdings Inc, its unit that owns community newspapers, as well as PureCars, a digital ad platform for the automotive industry. Gray said it will not acquire neither unit as part of the deal.

Raycom President and Chief Executive Officer Pat LaPlatney will become Gray’s president and co-chief executive officer, along with Gray CEO Hilton Howell.

Reporting by Munsif Vengattil in Bengaluru; Editing by Bernard Orr and Sriraj Kalluvila