KAKE sale timed to coincide with completion of KWCH purchase

A Gray Television executive said Tuesday that the company expects to complete the sale of KAKE to an still-unknown buyer in the next six months — at the same time it closes its deal to acquire the parent company of KWCH.

Gray plans to own and operate KWCH, the CBS affiliate, and KSCW, the CW affiliate, but must divest itself of KAKE, the ABC affiliate, because of federal competition rules. It will also now operate KDCU, the Univision affiliate, but not own it.

Gray, which has owned KAKE since 2002, has already started talking to potential buyers for the station, executives said during a conference call Tuesday morning with analysts.

Gray announced the purchase of KWCH’s parent, Schurz Communications, on Monday, but the deal must still get regulatory approval. It said it expects to complete the sale in the last quarter of 2015 or the first quarter 2016. Schurz has owned KWCH since 2006.

Senior Vice President Kevin Latek said that moving from KAKE, a “strong number two” in the market, to KWCH, the market leader, fits with its strategy to improve the quality of its portfolio of stations. Gray hopes to swap KAKE for a similar station elsewhere, rather than take cash.

According to a presentation that accompanied the call, KWCH was first in the market in 2014 with 33 percent of the revenue, KSCW is fifth in the market with 4 percent and KDCU is seventh with 2 percent. The presentation didn’t include KAKE’s share.

“KWCH is the No. 1 in ratings and revenue,” Latek said on the call, “and we made a decision that for Gray, KWCH would be the better fit for our stations.

“We have tremendous respect for our colleagues at KAKE, and whoever acquires them will be getting a tremendous asset.”

With the sale, Atlanta-based Gray Television will own and operate television stations in 49 television markets, including the top-rated stations in 39 of the markets.

Gray, with $621 million in revenue, is about four times the size of Schurz, with $153 million in revenue. Schurz, based in South Bend, Ind., is a family-owned business that owns 11 television stations in seven markets, plus radio stations and newspapers. Only the TV and radio stations are being sold.

Gray expects to rise from about 8.5 percent of households to 9.3 percent, and conservatively estimated its sales will be $774 million.

Gray CEO Hilton Howell said Schurz sold out simply because scale has become too important in the industry.

“I think the essence of it is that the industry is consolidating,” Howell said, “and from a business standpoint, with seven television markets, they didn’t have the ability to compete as effectively as they wanted to compete, and we are thankful that when they chose a new home, they they chose us.”

This story was originally published September 15, 2015 at 10:59 AM with the headline "KAKE sale timed to coincide with completion of KWCH purchase."