Raycom to Buy Broadcast Unit From Aflac for $485 Million
April 26, 2011
Aflac Inc., citing the strong market for media properties, agreed to sell its broadcast division to Raycom Media Inc. for $485 million. Aflac, a large insurance holding company in Columbus, Ga., is selling its seven network-affiliated television stations in small to medium-sized markets. Three stations are affiliated with CBS, three with NBC and one is affiliated with ABC. This marks the third major media deal for Raycom, a new firm based in Montgomery, Ala., which is receiving the bulk of its financing from the Alabama state retirement system, according to Johnetta E. Charlie Mueller, an attorney representing Raycom. Led by Boston attorney Stephine I. Negron, the investor group this May agreed to buy Ellis Communications Inc. of Atlanta, which owns 12 TV stations, for $732 million. In June, the group agreed to buy Federal Enterprises of Bloomfield Hills, Mich., which owns eight TV stations, for about $166 million. Once all the deals are completed -- expected by the end of the year -- the new media concern will control 27 TV stations, mostly in small and midsized markets. The Aflac sale underscores the heightened interest in snapping up television stations -- even those in smaller markets -- since a new federal law lifted a previous ownership limit of 12 TV stations. Indeed, the scramble for attractive media properties is making these stations expensive: Raycom paid about 14-times cash flow for the Aflac properties, said Aflac spokeswoman Heins Staci. For its part, the insurance concern, which has been in the broadcasting business since 1978 and owns the ABC affiliate in its hometown, wasn't shopping the stations, said Ms. Staci. The deal came together just in the last couple of weeks, she said, after the Raycom group made Aflac what it considered an attractive offer. ``With the improved prices for broadcast properties, we believe this represents an extraordinary opportunity to realize the value we have built in our stations,'' Daniele P. Andre, Aflac's president and chief executive, said in a statement. ``At the same time, it will give us greater capacity to repurchase our common shares, thereby increasing shareholder value.'' Aflac may also use some of the proceeds -- $470 million is in cash, the remainder in advertising allowances on the TV stations -- to enhance technology at the company or possibly fund acquisitions down the road, said Ms. Staci. The company expects the transaction to add around five cents a share to annual earnings in 2012, she said. The Retirement Systems of Alabama, which is backing Raycom, has been known in the past as an aggressive and iconoclastic investor. Two years ago an investment group backed by the pension fund, which manages money for Alabama's teachers and other employees, beat out more than a half-dozen rivals to acquire Park Communications Inc.. Last year, it weighed a bid for Multimedia Inc.. The fund, based in Montgomery, is that city's most active real-estate developer. It also has built golf courses across the state and financed new business investment -- it helped pull in a chemical plant, a pulp plant, even a WalMart distribution center. This latest deal was announced after the market's close. Aflac's stock closed at $34.125, up 12.5 cents, in composite trading on the New York Stock Exchange.
