In a major development, the Federal Communications Commission (FCC) recently granted approval to Gannett Co., Inc. (GCI - Free Report) for the acquisition of Belo. The deal has received all the requisite regulatory approvals and hence its completion will expectedly take place next week.
However, industry experts have been warning about the negative consequences that these acquisitions could have such as elimination of healthy competition and market dominance by a few players. To mitigate these, regulatory authorities have chalked out certain measures.
Earlier this month, Gannett and the U.S. Department of Justice (DOJ) reached an agreement in which the former agreed to sell a St. Louis-based television station KMOV-TV to facilitate completion of the Belo Corp. acquisition. Presently, Gannett operates KSDK-TV, which is an NBC associate in St. Louis.
KSDK-TV and KMOV-TV are the major competitors in the St. Louis market and as a result, the advertising rates remain under control. The DOJ’s main concern was the possibility of a rise in advertising rates if Gannett became the predominant player in the St. Louis market.
It was in June that Gannett announced the acquisition of television-station operator Belo Corp. Reportedly, the company will purchase all outstanding shares of Belo for $13.75 per share, bringing the estimated value to $1.5 billion in cash. Taking into account Belo’s existing $715 million debt, the total transaction value amounts to $2.2 billion.
The deal will serve as a game changer for Gannett, which competes with The New York Times Co. (NYT - Free Report) , Journal Communications Inc. and The E. W. Scripps Co. (SSP - Free Report) , as it will strengthen its foothold in the rapidly growing broadcast media business.
Moreover, this deal is a strategic fit for the company as it will transform Gannett’s business model, which was primarily focused on low-margin newspapers to a high-margin multi-media business.
Presently, Gannett carries a Zacks Rank #3 (Hold).