Media General's (MEG) Move to Acquire Meredith Corp. (MDP) Will Have no Immediate Ratings Impact - Moody's

Moody's says Media General, Inc.'s ("Media General")(NYSE: MEG) announced agreement to acquire Meredith Corporation ("Meredith")(NYSE: MDP) in a stock and cash transaction that values Meredith at roughly $3.1 billion has no immediate impact on Media General's credit ratings as we project the company's operating performance and credit metrics to improve and fall within the B1 rating in the first year post-closing. The merger is expected to close in 2Q2016 subject to shareholder approval from both companies as well as regulatory clearance, and the combined company will be renamed Meredith Media General.

The formation of Meredith Media General is initially credit neutral as the significant operating benefits of the combination largely offset the increase in leverage and added exposure to print advertising (we estimate at less than 10% of combined pro forma EBITDA). Beyond the first 12 months, we believe the transaction can be credit positive, reflecting the company's statement that it would apply free cash flow to reduce reported leverage to 3.5x or better in two years. Debt ratings will be supported by the company's fortified position as a leading local broadcaster with the #1 presence in the top 50 DMA's in addition to having critical #1 or #2 rankings in 80% of the combined markets. The company will be in a good position to deliver branded content across its national footprint and leading digital operations.

There are currently four large local broadcasters with television revenue of roughly $1 billion or more: Media General (B1 stable), Sinclair Broadcasting Group (Ba3 stable), TEGNA (Ba1 negative), and Tribune Media (Ba3 stable). The new Meredith Media General improves its position among these four operators with $1.9 billion of television revenue and distinguishes itself by adding Meredith's #1 or #2 ranked stations in attractive top 50 markets. Post-merger, the company increases its broadcast footprint to roughly 30% of U.S. TV households from 23%.

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