MCLEAN, Va. -- First Coast News' parent company, Gannett Co., Inc., has completed the purchase of Belo Corp. on Monday, adding 20 television stations, taking its portfolio to 43.
The Federal Communications Commission on Friday approved Gannett's proposed acquisition of competitor Belo, clearing all regulatory hurdles for the McLean, Va.-based company. The FCC's approval arrived less than a week after the two companies reached an agreement with the Department of Justice to sell the assets of a local station in St. Louis, KMOV-TV, that is owned by Belo, a development that set the stage for federal regulators' willingness to sign off on the deal.
"We are thrilled to combine these two storied media companies, both of which are known for award-winning journalism, operational excellence and strong brand leadership. The completion of this transaction marks a significant milestone in Gannett's ongoing transformation into a higher-margin and more highly diversified company in the rapidly evolving media business,"
said Gracia Martore, President and Chief Executive Officer of Gannett.
With the completion of the acquisition, Gannett's broadcast portfolio will increase to 43 from 23 TV stations, making it the largest independent owner of network affiliates in the top 25 markets. With 21 stations in the top 25 markets, it also becomes the largest owner of CBS affiliate stations and expands its already-largest NBC affiliate group.
"The added resources afforded by this unique merger should create more
value to viewers, users and advertisers going forward. We are also
excited for our staff who will find new opportunity in a larger, more
geographically diverse organization," said Eric Land, general manager
for First Coast News.
In June, Gannett, which also owns USA TODAY and 81 other newspapers, agreed to buy all outstanding shares of Dallas-based Belo for $13.75 per share in cash, or about $1.5 billion, and assume $715 million in existing debt.
Shares of Gannett rose 1.2 percent Friday to end at $27.81.
Citing rules that limit media ownership concentration, several public interest groups and cable companies -- including Free Press, Common Cause, DirecTV and Time Warner Cable -- filed complaints with the regulators, seeking to block or limit the deal.
The FCC prohibits the owner of a station that is among the top four in local viewership to buy another top-four station in the same market. And under these terms, Gannett and Belo would have overlapped in five markets -- Phoenix, St. Louis, Portland, Ore., Louisville, Ky. and Tucson.
To get around the restriction, Gannett plans to unload several stations under "shared services agreements," a practice that is common in the industry but opposed by critics of media consolidation. With KMOV now ordered to be sold, Gannett also agreed to transfer the licenses of six other stations in the four affected markets to other corporate entities -- five to Sander Media (controlled by former Belo executive Jack Sander) and one to to Tucker Operating Co. (controlled by former Fisher Communications CEO Ben Tucker).
Under their agreements, Sander and Tucker would operate these stations and pay Gannett for a range of services, including administration, IT operations and ad sales.
In their petitions, public interest groups argued that the shared services agreements are structured in a way that would enable Gannett to control daily decision-making of the Sander and Tucker stations.
Gannett responded that the deal would allow the company to achieve "economies of scale and employ infrastructure that will support its mission of local public service and its strong commitment to local journalism."
With more stations in its portfolio, Gannett gains leverage in negotiating retransmission fees with pay-TV providers. Retransmission fees -- the money that TV stations get from cable and satellite providers for the right to carry their signal -- increasingly are becoming a larger portion of broadcasters' revenues. Gannett's retransmission revenues rose 62.8% in the third quarter from a year ago.
The deal also helps Gannett cement its vow to move from its roots as a newspaper publisher to a diversified multimedia company. After the transaction, the broadcast segment is expected to contribute more than half of the company's operating income before interest, taxes and other items.
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