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Warren Buffett-Backed Media General Rises on Young Merger

Gamco CEO Mario Gabelli
Gamco Investors Inc. Chairman and Chief Executive Officer Mario Gabelli. Photographer: Chris Goodney/Bloomberg

Media General Inc., the TV broadcaster backed by Mario Gabelli and Warren Buffett, rose 34 percent after agreeing to combine with New Young Broadcasting Holding Co. in a stock deal valuing the companies at $870 million.

Media General, owner of 18 TV stations, rose to $9.76 at the close in New York, the biggest one-day gain in more than 19 months. The shares have more than doubled this year.

The merger highlights the hastening consolidation in local TV, driven by the fees stations and broadcast networks are beginning to extract from cable and satellite operators such as Comcast Corp. and DirecTV. Sinclair Broadcast Group Inc. has spent more than $1.84 billion in the past two years buying local outlets, expanding its reach to 34 percent of U.S. households, according to Bloomberg Industries.

George L. Mahoney, president and chief executive officer of Media General, will lead the new company, which will keep the Media General name and remain based in Richmond, Virginia, according to a statement today. New Young Broadcasting is headquartered in Nashville, Tennessee.

Media General will have about 89.1 million shares outstanding once the deal closes, including about 60.2 million issued to Young’s shareholders, according to the statement. That suggests a market value of about $870 million based on today’s prices.

With the combination, Media General will own 30 network affiliated stations in 27 markets, reaching about 16.5 million U.S. TV households, or 14 percent of the company. The stations will include 11 CBS affiliates, nine working with NBC, seven ABC outlets and one with Fox.

Combined Sales

Revenue for the two companies in 2012 totaled $605 million, including about $115 million from political advertising, according to the statement.

Media General sold its newspapers to Berkshire Hathaway Inc. a year ago for $142 million in cash plus loans totaled $445 million. In September, Buffett exercised warrants giving him 17 percent of the stock. Gamco has 33 percent, according to data compiled by Bloomberg.

The deal will restructure Media General’s dual-class shares, creating a new common that will be entitled to elect the entire board of directors, according to the statement.

Other TV stocks rose. Nexstar Broadcasting Group Inc., based in Irving, Texas, advanced 4.5 percent to $28.27. Sinclair, in Hunt Valley, Maryland, gained 2.7 percent to $24.68, and Belo Corp., based in Dallas, added 4.3 percent to $11.25.

RBC Capital Markets, LLC and Fried, Frank, Harris, Shriver & Jacobson LLP are advising Media General. Stephens Inc. and Gibson, Dunn & Crutcher LLP are advising the independent members Media General’s board, while Stephens delivered a fairness opinion. Wells Fargo Securities LLC and Debevoise & Plimpton LLP are advising Young Broadcasting.

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