Media General Preps for Its Pure-Play Days

Media General, nailing down its $142 million deal to sell 63 newspapers to Warren Buffett’s Berkshire Hathaway, is poised to recast itself as a virtual pure-play broadcast company. The Richmond, Va.-based outfit remains intent on selling its lone remaining paper, The Tampa Tribune, and plans to enter the second half of 2012 with an undivided focus on its 18 TV stations.

That might mean more mobile DTV rollouts, increased local news presence and more local hi-def adoptions. “We like the opportunity it affords us to focus on TV,” said Marshall Morton, president and CEO of Media General. “We think there are some opportunities there for us in broadcast and mobile, which maybe we didn’t have when you have a broader array of capital projects to support.”

The Berkshire Hathaway deal is expected to close June 25.

Media General has been one of the major champions of converged operations, with TV, print and digital properties working side-by-side in markets including Tampa, Myrtle Beach- Florence (S.C.) and Roanoke (Va). Morton said The Tampa Tribune “never came up” in discussions with Berkshire Hathaway, with Buffett keen on community papers more than metropolitan ones. Morton said multiple parties are interested in the Tribune.

Media General and Berkshire Hathaway are in talks to continue partnerships in the converged markets, Morton said. Some merged departments, such as sales, may not work as closely as they do today. “There’s got to be a little more distance since they [have separate] owners,” Morton added.

The deal marks a significant milestone for Media General, which has its roots in the debut of the Richmond Dispatch more than 160 years ago. Broadcast accounted for 77% of cash flow last year, according to the company. When the ink dries, Media General will join the likes of LIN, Sinclair and Belo as pure-play broadcasters, leaving a shrinking group of integrated TV/newspaper/digital companies that includes Gannett and Scripps. Scripps’ acquisition last fall of the McGraw- Hill TV stations further tilted Scripps’ balance toward broadcast. “From a profit perspective, today we are predominantly a television and digital enterprise,” Rich Boehne, Scripps president and CEO, said earlier this year.

Media General’s stations include WFLA Tampa, WSLS Roanoke and WJAR Providence (R.I.).

Much of Wall Street applauded Media General’s deal. “Assuming net proceeds from the newspaper sale of about $125 million, plus another $30 million for [The Tampa Tribune]…we estimate that the new TV company is worth roughly $12-$13 per share,” said Gabelli & Co. in a report. Gabelli said that valuation is a price the firm thinks an “informed strategic buyer” might pay for the entire enterprise.

Barry Lucas, senior VP of research at Gabelli, said the deal makes it easier to measure Media General’s performance against its broadcast peers. “I think on balance it’s a plus,” Lucas told B&C. “They wind up becoming a pure-play broadcaster, which is a better business model.”

Lucas believes Media General will benefit from having top brass focused solely on TV. Morton agreed, suggesting Media General will add to its four stations currently offering mobile DTV and improve content all around. “Local news is a natural place to look,” Morton said. “It’s a real magnet for anchoring your market position.”

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Michael Malone

Michael Malone, senior content producer at B+C/Multichannel News, covers network programming, including entertainment, news and sports on broadcast, cable and streaming; and local broadcast television. He hosts the podcasts Busted Pilot, about what’s new in television, and Series Business, a chat with the creator of a new program, and writes the column “The Watchman.” He joined B+C in 2005. His journalism has also appeared in The New York Times, The Philadelphia Inquirer, Playboy and New York magazine.