Gannett paying $2.2 billion for Belo

Gannett, owner of the Iowa City Press Citizen and the Des Moines Register, has agreed to pay $2.2 billion for television company Belo Corp.

With the acquisition, the largest owner of newspapers in the United States aims to make broadcast a bigger part of its business than print.

The deal, which includes $1.5 billion of cash and the assumption of $715 million of debt, would almost double Gannett's broadcasting assets. The McLean, Va., company would become the fourth-largest U.S. owner of major network affiliates, reaching nearly one-third of U.S. households.

If the deal is approved by shareholders and federal regulators, Gannett's broadcast segment would contribute more than half of the company's pro-forma earnings before interest, tax, depreciation and amortization. Its digital and broadcast segments combined are expected to contribute nearly two-thirds.

The transaction's cash portion values Belo at $13.75 per share, representing a 28.1 percent premium to Belo's closing price on Wednesday.

Shares in both companies rose on the news and Gannett said it would generate significant free cash flow and increase its non-GAAP earnings per share by about 50 cents in the first year. It also will result in about $175 million of annual savings within three years after closing.

Bill Smead, chief investment officer of Smead Capital Management, which lists Gannett as its third-biggest holding, said the purchase was good news for Gannett shareholders.

Belo, based in Dallas, owns and operates 20 television stations, with nine in the top 25 markets, and their associated websites.

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