Gray Television has agreed to buy Quincy Media in a cash deal worth $925 million. Shares of the television station owner increased 5.3% in US midday trading.
The company said the acquisition will be immediately accretive to its free cash flow per share, once the deal closes in the second or third quarter of this year.
According to Gray Television (GTN), the purchase price represents a multiple of around 6.9 times a blended average of Quincy’s FY20 EBITDA. As a result of this acquisition, Gray will own television stations that together reach 24.5% of households in the US and serve 102 television markets.
Hilton H. Howell, Jr., Gray Television’s CEO commented, “We are honored and humbled to be selected by Quincy’s shareholders to acquire their terrific company. Gray will become a stronger company with an even larger platform of high quality television stations to better serve the public interest first.”
Gray Television’s primary sources of revenues include broadcast advertising and retransmission revenues. In December last year, the company announced that since Jan. 1, 2020, its television stations had run $400 million worth of political advertisements in the US. (See Gray Television stock analysis on TipRanks)
As such, this acquisition could further add to the company’s advertising revenues with the addition of Quincy’s television stations. Quincy Media is a family-owned media company that owns and operates television stations primarily located in the mid-western United States.
Earlier this month, Loop Capital analyst Alan Gould raised the price target from $23 to $25 and reiterated a Buy rating on the stock. Gould stated that the stock is his “favorite small-cap media name”.
The analyst anticipates rising retransmission revenues, changes in television ownership rules that could benefit Gray, and the continuation of share buybacks as catalysts for this year.
The rest of the Street shares Gould’s bullish outlook with a Strong Buy consensus rating. That’s based on 3 analysts recommending a Buy. The average analyst price target of $25 implies 43% upside potential to current levels.