The companies said the all-stock deal will give Young shareholders majority ownership, but Media General will initially have the majority of board seats. The headquarters will be in Richmond, where Media General is currently based. Media General will be the name of the combined company. George Mahoney, its president and CEO, will keep that role in the new company.
The new Media General is expected keep the ticker symbol "MEG" on the New York Stock Exchange.
Media General's stock increased more than 22 per cent after the announcement. Young, which is based in Nashville, doesn't currently trade publicly.
Media General sold its newspapers last year to focus on broadcasting. It currently owns 18 network-affiliated stations, including WFLA in Tampa, Fla., while Young owns or operates 12, including KRON in San Francisco. After the combination, expected around September or October, the stations will include 11 with CBS, nine with NBC and seven with ABC. The combined company will also run websites and other digital services affiliated with those stations.
The companies say that by combining, the stations will be more geographically diverse and will be in more markets that have strong ad revenue from political campaigns. Having more stations will also give the companies more bargaining power when buying rights to broadcast syndicated shows, selling broadcast and digital ads and collecting fees from cable and satellite TV providers to carry their stations on customers' lineups.
The companies also expect a stronger credit profile, allowing the new company to refinance debt at lower interest rates. At the end of March, Media General had $601 million in debt and Young had $164 million.
On a pro forma basis, which typically excludes one-time items, Young's current shareholders will own 67.5 per cent of the new company, and Media General's current shareholders the rest.
As part of the deal, Media General will reclassify each share of its Class A and Class B common stock into one share of a newly created class of Media General common stock. Owners of the new shares will be able to elect all of Media General's directors. Class B owners will give up their right to directly elect 70 per cent of the board.
The new company's board will initially consist of Media General's nine current directors and Young's current five board members. After next year's annual shareholders meeting, however, the board will be reduced in size, with only five of the current Media General directors and the five from Young. An 11th person will be selected by a five-person nominating committee weighed in Young's favour.
The boards of both companies have approved the deal, as have Young's shareholders. It is subject to approval from Media General shareholders and from regulators. A vote has yet to be scheduled.
Media General's stations are in Alabama, Florida, Georgia, Mississippi, North Carolina, Ohio, Rhode Island, South Carolina, Tennessee and Virginia. Young's are in California, Iowa, Louisiana, Michigan, New York, South Dakota, Tennessee, Virginia and Wisconsin.
Shares of Media General rose $1.61 to $8.91 in midday trading Thursday. The stock has traded in the 52-week range of $3.39 to $10.17.