Gannett to buy Belo for $1.5 billion

Media company Gannett Co Inc said on Thursday that it agreed to pay $1.5 billion in cash to buy Belo Corp and assume $715 million in debt, giving television company Belo an enterprise value of $2.2 billion.

The deal, which represents a 28.1 percent premium to Belo's closing price on Wednesday, would almost double Gannett's broadcasting assets, making it the fourth-largest U.S. owner of major network affiliates, reaching nearly one-third of U.S. households, according to the company.

The transaction's cash portion values Belo at $13.75 per share.

Gannett, already the largest newspaper chain in the United States, said the deal would generate significant free cash flow and increase its non-GAAP earnings per share by about 50 cents in the first year. It will also result in about $175 million of annual savings within three years after closing.

The deal, which is expected to close by the end of 2013, will need antitrust approval, Federal Communications Commission (FCC) approval, and approval by holders of two-thirds of Belo shares, Gannett said.

It said Belo's directors and executive officers, who collectively own about 42 percent of the voting power of Belo's outstanding shares, have already agreed to vote in favor of the deal. Gannett expects to finance the purchase through cash on hand and accessing capital markets as well as bank financing.

J.P. Morgan Securities is provided financial advice and Nixon Peabody and Paul Hastings were legal advisers to Gannett while Belo's financial adviser was RBC Capital Markets and Wachtell Lipton Rosen & Katz acted as its legal adviser.

Gannett's shares rose almost 14.7 percent in premarket trading to $22.76 after closing at $19.85 on the New York Stock Exchange. Belo's shares rose 27.6 percent to $13.69 after closing at $10.73, also on NYSE.

(Reporting by Sinead Carew; Editing by Gerald E. McCormick and Maureen Bavdek)