Media General (MEG) Enters $142M Newspaper Sales Agreement with Berkshire (BRK-A)
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Media General, Inc. (NYSE: MEG) today announced that it has signed agreements with Berkshire Hathaway, Inc., (NYSE: BRK.A and BRK.B) for the purchase of newspapers and new financing. A subsidiary of Berkshire Hathaway, BH Media Group, will purchase all of the newspapers owned by Media General, with the exception of the Tampa group, for $142 million in cash. Media General said it is in discussions with other prospective buyers for its Tampa print assets.
Under a separate credit agreement, Berkshire Hathaway will provide Media General with a $400 million term loan and a $45 million revolving credit line. The new loan will be used to fully repay the company's existing bank debt due March 2013 and will mature in May 2020. In conjunction with this, Media General will issue Berkshire Hathaway penny warrants for approximately 4.6 million Class A shares, which represents 19.9 percent of Media General's existing shares outstanding. In addition, Berkshire Hathaway has the option to nominate a director to Media General's Board of Directors.
The newspaper transaction is expected to close on June 25. A transition will take place over several months, in coordination with Media General personnel. World Media Enterprises president Douglas Hiemstra will closely oversee the transition and operations of the acquired newspapers for Berkshire Hathaway. After transaction fees and retaining $25 million in cash, Media General will use the proceeds from the newspaper sale to offer to repay existing senior secured notes, with any remaining funds to be used for repayment of the new term loan at par. The sale is subject to customary closing conditions, including Federal Trade Commission approval under the Hart-Scott-Rodino antitrust act.
The $400 million first lien term loan will have an interest rate of 10.5 percent, which could step down to 9 percent if total leverage were to reach 3.50x. The new loan will be issued at a discount of 11.5 percent and is secured pari passu with the company's existing 11-3/4 percent senior secured notes due 2017. The closing date of the new credit agreement is expected to be no later than May 24. The existing term loan in the amount of approximately $364 million will be fully repaid the same day the new credit agreement becomes effective. Media General now expects total cash interest expense in 2012 will be approximately $67 million. Total interest expense, including non-cash amortization of issue discount, new issuance fees, and the warrants, is expected to be $80 million in 2012.
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Under a separate credit agreement, Berkshire Hathaway will provide Media General with a $400 million term loan and a $45 million revolving credit line. The new loan will be used to fully repay the company's existing bank debt due March 2013 and will mature in May 2020. In conjunction with this, Media General will issue Berkshire Hathaway penny warrants for approximately 4.6 million Class A shares, which represents 19.9 percent of Media General's existing shares outstanding. In addition, Berkshire Hathaway has the option to nominate a director to Media General's Board of Directors.
The newspaper transaction is expected to close on June 25. A transition will take place over several months, in coordination with Media General personnel. World Media Enterprises president Douglas Hiemstra will closely oversee the transition and operations of the acquired newspapers for Berkshire Hathaway. After transaction fees and retaining $25 million in cash, Media General will use the proceeds from the newspaper sale to offer to repay existing senior secured notes, with any remaining funds to be used for repayment of the new term loan at par. The sale is subject to customary closing conditions, including Federal Trade Commission approval under the Hart-Scott-Rodino antitrust act.
The $400 million first lien term loan will have an interest rate of 10.5 percent, which could step down to 9 percent if total leverage were to reach 3.50x. The new loan will be issued at a discount of 11.5 percent and is secured pari passu with the company's existing 11-3/4 percent senior secured notes due 2017. The closing date of the new credit agreement is expected to be no later than May 24. The existing term loan in the amount of approximately $364 million will be fully repaid the same day the new credit agreement becomes effective. Media General now expects total cash interest expense in 2012 will be approximately $67 million. Total interest expense, including non-cash amortization of issue discount, new issuance fees, and the warrants, is expected to be $80 million in 2012.
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