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Media General up 30 Percent on M&A Deal (MEG)

Share of communications company Media General (NYSE: MEG)were up 30 percent in Thursday trading on news that it is merging with privately held New Young Advertising.

The two companies will merge in an all stock transaction to form a media company with 30 stations in 27 markets reaching 14 percent or 16.5 million TV households. The new company will continue trading on the New York Stock Exchange under the same ticker symbol and same company name. The company expects significant cost savings amounting to $25 million to $30 million.

Current shareholders will own about one-third of the new company. In 2012, New Young had $600 million in revenue while Media General had $360 million.

Size matters in media and that is one of the main reasons for the merger, according to the companies. The larger size will give it more bargaining power in negotiations, according to the Associated Press. Additionally, it will have more of a presence in areas that traditionally attract a lot of ad dollars from political campaigns.

According to Bloomberg, Media General sold it’s newspapers to Berkshire Hathaway (NYSE: BRK-A)(NYSE: BRK-B) for $142 million in cash plus loans that total $445 million. Buffett later exercised warrents that gave him a 17 percent stake in the stock.

Disclosure: At the time of this writing, Tim Parker had no position in the above mentioned stocks.

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