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Gray Television, Inc. ("Gray" or "we"
or "our")
announced today that it has reached
agreements to sell television stations in three markets to facilitate
regulatory approvals for its recently announced acquisition of the
television and radio stations owned by Schurz Communications, Inc.
("Schurz"). Gray also announced the acquisition of three additional
television stations that will result in Gray operating in one additional
market. Upon the closing of all previously announced transactions, Gray
will own and/or operate network affiliated television stations serving 50
markets across the country.
In the Wichita, Kansas, market (DMA 65), Schurz owns CBS affiliate KWCH-TV
and Gray owns ABC affiliate KAKE-TV. Gray previously announced its
intention to acquire KWCH-TV and divest KAKE-TV.
Gray has now reached an agreement with Lockwood Broadcast Group, Inc.
("Lockwood") to sell all of KAKE-TV's assets in exchange for the assets of
Lockwood's WBXX-TV and $11.2 million in cash. WBXX-TV is the CW affiliate
for the Knoxville, Tennessee, market (DMA 62), where Gray owns CBS affiliate
WVLT-TV. This swap will provide Gray with a second owned television station
in our company's largest market, and the cash component will slightly lower
our effective purchase price for the Schurz acquisition. Gray and Lockwood
will not enter into any form of shared services agreement, such that KAKE-TV
will be owned and operated completely independently from Gray following the
closing of this transaction. The implied pro forma broadcast cash flows of
KAKE-TV and WBXX-TV (after including the cash component) are approximately
equivalent. The parties structured the transaction as a like-kind exchange
for tax purposes.
Hilton H. Howell, Jr., Gray's President and CEO, explained, "Our decision to
sell KAKE-TV resulted from our conclusion that we are not in the best
position to be long-term stewards of KAKE-TV despite its impressive recent
competitive inroads. We will watch with admiration as the station builds on
its recent improvements under Lockwood. KAKE-TV has great employees, and we
know they will continue to succeed in the future. At the same time, we are
delighted to have reached an agreement with Lockwood that allows us to
deepen our investment and expand our opportunities in Knoxville through the
acquisition of WBXX/CW20."
In the South Bend, Indiana, market (DMA 96), Schurz owns CBS affiliate
WSBT-TV and Gray owns NBC affiliate WNDU-TV. Gray previously announced its
intention to retain WNDU-TV and divest WSBT-TV.
Gray has now reached agreements with Sinclair Broadcast Group, Inc.
("Sinclair") to sell all of WSBT-TV's assets in exchange for the assets of
Sinclair's WLUC-TV in Marquette, Michigan, whose channels serve as the NBC
and Fox affiliates for the Marquette market (DMA 180). WLUC-TV is the
number-one ranked and highest grossing station in the market. Gray and
Sinclair will not enter into any form of shared services agreement, such
that WSBT-TV will be owned and operated completely independently from Gray
following the closing of this transaction. The broadcast cash flow of
WSBT-TV and pro forma broadcast cash flow of WLUC-TV are approximately
equivalent.
"We are very excited to welcome WLUC-TV and the communities of the Upper
Peninsula to the Gray family," Mr. Howell said. "As the clear market leader
in news, ratings, and revenue, WLUC TV6 is a perfect fit for Gray as well as
a fantastic addition to the network of very strong Gray stations across
Michigan and Wisconsin."
In the Rapid City, South Dakota, market (DMA 171), Schurz owns ABC affiliate
KOTA-TV and Gray owns Fox affiliate KEVN-TV. Gray has now reached an
agreement to sell to Legacy Broadcasting, LLC ("Legacy") all of KOTA-TV's
assets, including FCC licenses, real estate, programming agreements, and
retransmission consent agreements, other than those assets used for
KOTA-TV's ABC program stream. The sales price for this transaction is one
dollar. Broadcast veterans Sherry C. Nelson and Sara Jane Ingram own
Legacy, which owns and operates television stations in three other Midwest
markets. Gray and Legacy will not enter into any form of shared services
agreement, such that Legacy will own and operate KOTA-TV's MeTV and ThisTV
channels completely independently from Gray following the closing of this
transaction. Gray intends to transition the existing ABC program stream to
KEVN-TV at the closing.
In addition, in the Anchorage, Alaska, market (DMA 148), Gray previously
announced that it will acquire from Schurz the market's NBC affiliate,
KTUU-TV. Recently, Gray reached an agreement with Fireweed Communications
LLC ("Fireweed") to acquire KYES-TV, the market's MyNet affiliate, for
$500,000. Gray will apply to the FCC for a "failing station" waiver of the
local ownership rules to permit the combination of KTUU-TV and KYES-TV,
which we believe will permit us to improve the programming and services
offered by both stations.
Gray anticipates closing the transactions announced today in the fourth
quarter of 2015 or first quarter of 2016. The transactions with Sinclair
and Legacy will close simultaneously with the Gray/Schurz transaction.
Wells Fargo Securities, LLC served as financial advisor to Gray on the
Wichita and South Bend transactions. Cooley LLP served as primary legal
counsel for Gray on all of the transactions announced today.
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