Meredith Corporation (MDP) has reached an agreement for the sale of its Local Media Group (LMG) unit to Gray Television (GTN) for $2.7 billion in cash. The spin-off will pave the way for the company to organize itself under its digital and magazine segments.
Following the sale, Meredith will focus on its National Media Group brands. The slimmed-down company will continue to be publicly traded under the current name.
Shareholders are to receive a cash consideration of $14.50 per share. Additionally, they will continue to own the same number of shares as they do currently in the restructured company once the transaction has been completed. Meredith intends to use the proceeds from the sale to significantly reduce its debt.
The sale of LMG should allow Meredith Corporation to focus on its iconic brands, notably People, Better Homes & Gardens, and Allrecipes. The company also plans to continue producing and delivering content for women, its biggest customer base. (See Meredith stock analysis on TipRanks).
Following the spin-off, Meredith intends to invest in accelerating its digital footprint and leveraging its “industry-leading first party data” to generate value.
“We expect the transaction to unlock meaningful shareholder value as it advances all of the company’s financial priorities: reducing net debt, improving financial flexibility, allocating capital to fast-growing digital and consumer opportunities, and providing returns to shareholders,” said CEO and Chairman, Tom Harty.
In March, Benchmark analyst Daniel Kurnos upgraded the stock to a Buy from a Hold. At the time, the analyst reiterated that the market was “materially undervaluing” the digital licensing media conglomerate.
According to the analyst, FY2021 will prove to be a pivotal year as digital marketing overtakes print advertising. Likewise, the analyst has reiterated a $38 price target on the stock implying 7.92% upside potential to current levels.
Consensus among analysts is a Moderate Buy based on 2 Buy ratings. The average analyst price target of $33 implies 6.28% downside potential to current levels.
Meredith scores a “Perfect 10” on TipRanks’ Smart Score rating system, implying it is likely to outperform market expectations.
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