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Gray Buys Diversified's WABI and WCJB for $85 Million

ATLANTA—Gray Television announced today that it has reached an agreement to acquire the two television stations owned by Diversified Communications for $85 million. This adds WABI, the CBS/CW in the Bangor, Maine (DMA #156) and WCJB, the ABC/CW in the Gainesville, Fla. (DMA #161).

“This was a very difficult decision by our board of directors, but we feel it is the right one,” said Diversified’s board chair, Daniel Hildreth. “We believe that under the ownership of Gray, WCJB and WABI will have greater opportunities for long-term financial success which will ultimately benefit both our employees and viewers.”

Gray said WABI and WCJB each consistently achieve top ratings in all major dayparts in their respective market, in both households and key demos. Further, Gray said, each station has also been the most-watched television station in its market throughout all of its weekday local news time slots across at least the last nine Nielsen ratings periods. Also, according to BIA data, each station has achieved a market revenue share exceeding 50 percent for the past several years.

WABI in Bangor was Maine’s first television station and currently is the nation’s oldest continuously family-owned station. The station has long operated a news bureau covering the state capital of Augusta, which lies outside of its DMA. This transaction will reunite WABI with our station in Presque Isle, WAGM, which Diversified previously owned, thereby facilitating further news and resource sharing between these stations.

WCJB in Gainesville had the only local news department among all commercial stations in its market until 2010. It serves Gainesville, home to the University of Florida. Gray said it expects WCJB to share news and other resources with Gray’s WCTV in Tallahassee.

Gray anticipates the stations will produce “two-year, blended broadcast cash flow margins greater than 50 percent. We expect the acquisition will be immediately free cash flow accretive and allow us to continue to de-lever our balance sheet.”

The transaction represents a purchase price multiple of less than 7x expected blended 2016-17 pro forma broadcast cash flow, including expected synergies, Gray said.

“We anticipate closing the transaction primarily through the use of cash on hand at closing and, if necessary, borrowings under our existing senior credit facility. Subject to receipt of regulatory and other approvals, we expect the transaction will close in the second quarter of 2017,” Gray said.

Cooley LLP served as legal counsel for Gray. Wells Fargo Securities, LLC served as financial advisor and Sullivan & Worcester LLP served as legal counsel for Diversified Communications.

Gray currently owns and/or operates 100 television stations across 54 television markets that collectively broadcast over 200 program streams including 101 channels affiliated with CBS, NBC, ABC and Fox networks.