Do Meredith Shareholders Get Enough in the Buyout?

On Monday, Media General Inc. (NYSE: MEG) and Meredith Corp. (NYSE: MDP) announced a definitive merger agreement under which the former will acquire all the outstanding common stock of the latter in a cash and stock transaction valued at up to $3.1 billion.

Meredith shareholders are to receive $34.57 in cash and 1.5214 shares of stock, valued at $51.53 per share, which represents a 12% premium to closing price of Meredith stock on September 4. For each share Media General shareholders own, they will receive one share, upon closing, of the new company, to be known as Meredith Media General. After the deal closes, Media General shareholders will own around 65% and Meredith shareholders will own about 35% of the fully diluted shares of the new company.

Current Media General Chairman J. Stewart Bryan III will be chairman of Meredith Media General, while Meredith CEO Stephen M. Lacy will remain on as chief executive.

Media General owns and operates 71 network-affiliated television stations in the United States. Meredith operates as a diversified media company, with its National Media segment publishing magazines for women, such as Better Homes and Gardens and Martha Stewart Living, while its Local Media segment consists of 16 owned television stations and 13 websites.

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The merger is expected to create the third-largest owner of major network affiliates, initially with 88 stations in 54 markets, reaching 30% of U.S. TV households, as well as creating a powerful digital platform reaching more than 200 million monthly unique visitors via leading national and local consumer sites.

The announcement said the new company will have a “Strong focus on capital stewardship with disciplined capital allocation plan and emphasis on debt reduction in the near term, and strong commitment to returning cash to shareholders via dividends over the longer term.”

The boards of directors of both companies have approved the transaction. It is subject to approval of Media General and Meredith shareholders, as well as customary closing conditions and regulatory approvals. The deal is expected to close by June 30, 2016.

Investors were initially wary, as shares of both companies were down after the announcement in Monday’s premarket.

Media General shares were down 1.8%, at $11.15 in a 52-week trading range of $10.88 to $18.00. Analysts had a consensus price target of $19.25 before the merger announcement.

Shares of Meredith were down 0.7% to $45.94. Its 52-week range is $39.40 to $57.22, and the consensus price target is $52.67.

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