In order to enhance its television portfolio, Meredith Corporation (MDP) entered into a deal to acquire television stations in Phoenix and St. Louis from Gannett Co., Inc. (GCI) and Sander Media LLC for $407.5 million in cash. Shares of this Zacks Rank #2 (Buy) stock rose 4.8% on the announcement to close at $51.16.
The publisher of Better Homes and Gardens and Family Circle stated that the stations, which it will purchase, were earlier part of the transaction that led to Gannett's acquisition of Belo Corp. The stations, which Meredith is acquiring includes KTVK, an independent station in Phoenix, KASW, the CW affiliate in Phoenix and KMOV, the CBS affiliate in St. Louis.
A third party, SagamoreHill of Phoenix will buy the license and certain assets of KASW but Meredith will provide operational services. Meredith hinted that the acquisitions will be accretive and generate revenue of $105 to $115 million a year post completion of the transaction, thereby augmenting earnings by 16 – 18 cents a share.
The deal, which is expected to conclude in the first half of calendar year 2014, is the latest among several strategic acquisitions made by Meredith. The company, which competes with Martha Stewart Living Omnimedia Inc. (MSO), had earlier added Allrecipes.com; Every Day with Rachael Ray; FamilyFun; EatingWell; Parenting and BabyTalk to its portfolio.
These acquisitions form a part of Meredith's Total Shareholder Return (:TSR) strategy that was initiated in Oct 25, 2011, and aided in enhancing revenue and cash flows, giving a return of more than 115% since the inception of the strategy. Under this TSR program, the company has hiked its dividend by 60% and is authorized to repurchase shares worth $100 million.
Meredith, through strategic alliances leverages its brands, which supplement the sales of the company. Meredith extended its contract with Wal-Mart Stores Inc. (WMT), which includes expanding Better Homes and Gardens branded home decor and garden program at the latter’s stores across the United States and Canada.