Gray Television’s $3.6 Billion Acquisition of Raycom

Wells Fargo Securities, LLC served as financial advisor and Cooley LLP and Jones Day served as legal counsel for Gray. Stonebridge Capital served as financial advisor and Robinson Bradshaw and Covington & Burling served as legal counsel for Raycom.

Gray Television, Inc. (NYSE: GTN and GTN.A) and Raycom Media, Inc., an employee-owned company, have entered into an agreement to combine their companies in a transformative transaction that will create the single largest owner of top-rated local television stations and digital assets in the country.

This transaction marks Gray’s transformation from a small, regional broadcaster into a leading media company with nationwide scale based on high-quality stations with exceptional talent in attractive markets. Gray and Raycom have highly complementary portfolios of television stations as well as highly complementary company cultures, award-winning journalistic commitments, and long histories of commitments to exceptional community service. Gray in particular is delighted to announce that, upon the closing, Raycom President and CEO, Pat LaPlatney, will become Gray’s President and Co-Chief Executive Officer. In addition, Mr. LaPlatney and Raycom’s former President and CEO, Paul McTear, both of whom are currently members of Raycom’s Board of Directors, will join Gray’s Board of Directors. At that time, Hilton Howell will become Executive Chairman and Co-Chief Executive Officer of Gray.

The transaction is subject to customary closing conditions and regulatory approvals. The parties expect to close the transaction in the fourth quarter of 2018.

Under the terms of the merger agreement between the parties, Gray will acquire Raycom for $3.647 billion in total proceeds, consisting of $3.547 billion in enterprise value and $100 million of Raycom cash. The consideration 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.

Wells Fargo has underwritten the debt financing portion of the transaction in the amount of $2.525 billion. Gray’s existing Term Loan B and Senior Unsecured Notes will remain in place. Expected strong free cash flow generation through the closing of all pending transactions and throughout 2018 should allow Gray to deleverage its capital structure following the closing. Gray anticipates that, assuming a year-end 2018 closing, its total leverage ratio, net of all cash, would approximate 5.0 times trailing eight-quarter operating cash flow, including estimated synergies.

Including expected synergies and excluding CNHI and PureCars, the transaction purchase price represents a multiple of approximately 7.5 times a blended average of Raycom’s anticipated 2018/2019 operating cash flow and 7.8 times a blended average of Raycom’s anticipated 2017/2018 operating cash flow. This multiple includes approximately $80 million in identified contract, insourcing, and other efficiency synergies during the first full calendar year following the closing. The multiple also includes the anticipated net present value of the deferred tax asset resulting from Raycom’s net operating losses.

The transaction has been approved unanimously by the Boards of Directors of both Gray and Raycom. The transaction has also been approved by the requisite vote of the Raycom shareholders. No Gray shareholder vote will be required. Gray shareholders will retain 89 percent of the economic ownership of the Company following the closing.

Cooley advised Gray Television with a team including Kevin Mills (Picture), Maureen Nagle, John Feore, Alex Weaver, Kevin Gibson, Michael Basile, Henry Wendel, Christian Pena, Robert M. McDowell, Mike Faber, Stephanie Gentile, Stacy Crosnicker, Elizabeth Lewis, Ryan Hutzler, Parker Erkmann and Sharon Connaughton.

Jones Day advised Gray Television with a team led by Mark L. Hanson.

 

Involved fees earner: Kevin Mills – Cooley LLP; Maureen Nagle – Cooley LLP; Alex Weaver – Cooley LLP; Kevin Gibson – Cooley LLP; Michael Basile – Cooley LLP; John Feore – Cooley LLP; Michael Basile – Cooley LLP; Henry Wendel – Cooley LLP; Robert McDowell – Cooley LLP; Mike Faber – Cooley LLP; Stephanie Gentile – Cooley LLP; Stacy Crosnicker – Cooley LLP; Elizabeth Lewis – Cooley LLP; Ryan Hutzler – Cooley LLP; Parker Erkmann – Cooley LLP; Sharon Connaughton – Cooley LLP; Mark Hanson – Jones Day;

Law Firms: Cooley LLP; Jones Day;

Clients: Gray Television Inc.;