Nexstar Makes $4.1B Offer for Media General

28 Sep 2015 | Author: | No comments yet »

Nexstar Broadcasting makes bid for Media General.

IRVING, Texas — Nexstar Broadcasting is trying to wedge between Media General and Meredith Corp. with a nearly $1.9 billion offer to buy Media General. Nexstar Broadcasting has made a bid for TV-station owner Media General, in a surprise maneuver aimed at breaking up Media General’s effort to acquire Meredith Corp.

The second wave of TV station consolidation went into full swing Monday with Nexstar Broadcast Group’s $4.1 billion unsolicited offer to purchase Media General. The proposal comes less than three weeks after Media General offered to pay $2.4 billion for its rival Meredith, the publisher of Better Homes and Gardens magazine and owner of a variety of local television stations. Nexstar’s proposal, currently valued at $14.50 per Media General share, includes $10.50 in cash and a fixed ratio of 0.0898 Nexstar shares, according to a statement Monday. Nexstar NXST, +3.32% Chairman and Chief Executive Perry Sook sent a letter Monday morning to Media General’s MEG, +21.35% board offering $14.50 a share for the company.

Media General said at the time that the Meredith deal would create one of the largest owners of broadcast network affiliates in the United States, with annual revenue of about $3 billion. The proposal, which values the Richmond, Va., company at about $1.85 billion, represents a premium of 30% over Media General’s closing price on Friday of $11.15 a share. Our proposal would also enable Nexstar and Media General shareholders to participate in the near- and long-term upside of a pure-play broadcasting company with expanded audience reach, a more diversified portfolio, and a significantly stronger financial profile, including substantial free cash flow per share, led by a proven broadcast and digital media management team.

We look forward to engaging in dialog with the financial community regarding the superior merits of our proposed transaction.” BofA Merrill Lynch is acting as financial advisor and Kirkland & Ellis LLP is acting as legal counsel to Nexstar in connection with the proposed transaction. Nexstar is already growing rapidly as a result of our organic and M&A initiatives, but a combined Nexstar/Media General would be even better positioned for long-term success in a dynamic and consolidating market and certainly better positioned to deliver shareholder value than a combined Media General/Meredith.”

Station consolidation has been on the upswing lately with Media General’s Meredith deal and Gray TV’s agreement to buy Schurz Communications for $442.5 million. Media General, based in Richmond, Va., owns or operates 71 television stations in 48 markets and owns a digital media business, whose portfolio includes Federated Media and BiteSizeTV.

We have been attempting for many months to enter into substantive negotiations with you regarding a combination of Media General, Inc. (“Media General”) and Nexstar Broadcasting Group, Inc. (“Nexstar”). The company expects to own and operate 114 television stations after completing other recently announced transactions, including an agreement announced this month to buy four North Dakota television stations for $44 million.

The ill-conceived Meredith transaction, which caused an immediate drop in Media General’s stock price and criticism from a number of your investors and analysts, exposes Media General once again to the publishing business and creates a pro-forma EBITDA mix with significant exposure to publishing. It also represents an enterprise value multiple of approximately 9.1x Media General’s projected blended 2015/2016 EBITDA based upon analysts’ consensus estimates, which compares favorably with both precedent transactions and trading multiples in the broadcast sector.

Your shareholders should be aware of the compelling value represented by our proposal, which would be lost if the Meredith-Media General transaction is consummated. Based on the stated rationale and benefits associated with the Meredith merger, you clearly believe in the logic of broadcast consolidation and that the value of Media General’s assets can be better realized under different management. We would be an enhanced retransmission partner, have available potential additional spectrum for upcoming auctions and deliver greater opportunities for disciplined expansion in digital media and other complementary operating areas.

The Media General/Meredith Transaction Requires Significantly Greater Divestitures.Overlapping markets in the Meredith transaction include top-ranked DMAs including Portland, OR (#23), Nashville, TN (#29) and Hartford-New Haven, CT (#30), which are expected to be divested as a regulatory condition to complete that combination. We believe a Media General/Nexstar combination is far more complementary; while it would require a similar number of divested stations, they would be in significantly smaller markets and result in substantially less revenue and EBITDA leakage. Based on a blended EBITDA purchase multiple of 9.5x for Meredith as a whole, and an assumed publishing multiple of 6.5x, we estimate that Media General is acquiring Meredith’s net broadcast EBITDA at approximately 13x, well above precedent transactions. It provides your shareholders with a substantial premium, certain and immediate cash value, and continued participation in the ongoing strategic and financial benefits of a combination with Nexstar, including anticipated year one synergies of $75 million. Given all of the above, we believe our proposal constitutes or would reasonably be expected to lead to a “Montage Superior Offer”, as defined in your existing merger agreement with Meredith.

Accordingly, a definitive agreement between us would not contain any financing condition, and we are prepared to provide you with full financing commitment papers. This letter is a non-binding, preliminary proposal, which is subject to the execution and delivery of mutually acceptable definitive agreements, termination of your transaction with Meredith and the satisfaction of customary closing conditions. Nexstar’s record of effectively integrating and extracting synergies from acquired stations and assets has consistently met or exceeded our goals and expectations. We believe that our long-term acquisition strategies and operating discipline, combined with the prudent management of our capital structure, is a proven formula for sustained long-term growth and shareholder value appreciation.

Accordingly, we are highly confident that a Nexstar-Media General combination would deliver significant value to our respective shareholders and provide a clear and transparent path toward creating a stronger company, well-positioned to achieve sustainable, long-term growth.

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