NEW YORK (Reuters) - U.S. media group Meredith Corp’s planned purchase of Time Inc is the latest in a run of mergers that have boosted media lending to the highest point in more than a decade as the sector regroups to fight online content providers.
Meredith said it would buy Time, the Sports Illustrated and People magazine publisher, on November 26 in a deal valued at US$2.8bn including debt, backed by US$3.55bn of committed bank financing and a US$650m preferred equity commitment from Koch Equity Development.
Nearly US$94bn of investment-grade and leveraged loans have been provided to media companies so far this year, including deals that are completed and in process, up from US$59bn in 2017, according to Thomson Reuters LPC data.
Media companies’ quest for more and varied content, combined with relaxed restrictions on network ownership and liquid banks keen to provide funding are driving the mergers, which are expected to accelerate, bankers and attorneys said.
“The big old guard is trying to find ways of providing content as the wave of the future,” an M&A attorney said.
The US$94bn figure, which includes new money and a robust stream of refinancing deals, is the highest media volume since US$117bn in 2006, the data shows.
Acquisition loans accounted for more than a quarter of this year’s total, for the biggest share since 68% in 2015. Volume two years ago was skewed by sizable deals including US$30bn for Charter Communications Inc’s buy of Time Warner Cable and Bright House Networks LLC.
Relatively low asset prices are helping to spur merger decisions by traditional media companies which are keen to stay competitive with highly successful online streaming services including Netflix Inc and Amazon.com.
Meredith said the tie-up adds the content creation of strong national brands to a powerful local television business, expanding the reach of advertisers.
“The pace of media M&A is picking up and will probably accelerate over the next couple of years, as bigger and more diversified companies will have more negotiating leverage,” a banker said. “Everything’s on the table now.”
Comcast Corp, Verizon Communications and Walt Disney Co separately indicated interest in buying assets from Twenty First Century Fox Inc in recent weeks.
Discovery Communications said it was buying Scripps Networks Interactive for US$14.6bn over the summer, supported by a US$9.6bn 364-day bridge loan to finance the purchase.
Media mergers this year included Sinclair Broadcast Group, which said it would acquire Tribune Media Co for US$3.9bn in May. The move followed a vote by the Federal Communications Commission to reverse a 2016 decision that limited the number of television stations some broadcasters could buy.
“Sinclair’s acquisition of Tribune was, in part, driven by expectations that the rules would be relaxed around station ownership and market concentration,” another banker said.
“There continues to be an expectation that there will be consolidation, particularly in a regulatory environment that is friendlier, at least on the broadcast side,” he added.
Earlier in November, the FCC also voted to remove a 42-year-old ban on cross ownership of a TV station and a newspaper in a major market, among several changes that could open the door to new deals among TV, radio and newspaper owners that are seeking to better compete with online media, Reuters reported.
The unsettled US$85.4bn AT&T Inc purchase of Time Warner Inc is, however, still lurking in the background after the US Department of Justice sued AT&T to block the deal on November 20.
President Donald Trump has frequently criticized Time Warner’s CNN news division and during the presidential election said that this merger would put too much power in AT&T’s hands.
Uncertainty about the outcome of this deal, which was first announced in October 2016, “puts a monkey wrench” in the media and telecom merger spree, the first banker said.
Nonetheless, the motivation and momentum for media mash-ups will persist, he said. “You don’t want to be left as the small, odd guy out, without negotiating power.”
Reporting by Lynn Adler; Editing By Tessa Walsh and Jon Methven