In a major development, the Federal Communications Commission
(FCC) recently granted approval to
Gannett Co., Inc.
) 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.
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The deal will serve as a game changer for Gannett, which competes
The New York Times Co.
Journal Communications Inc.
The E. W. Scripps Co.
), 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).