Nexstar offers to buy Media General for $4.1 billion

28 Sep 2015 | Author: | No comments yet »

Meredith Corp. sale may be in jeopardy as Nexstar submits bid to acquire Media General.

Nexstar Broadcasting Group Inc. made an unsolicited bid to buy Media General Inc. for about $1.85 billion, trying to break the broadcaster’s agreement to acquire TV-stations owner and magazine publisher Meredith Corp.Charging that Media General deal to acquire Meredith is “value-destructive” and “ill-conceived,” Nexstar CEO Perry Sook says he is prepared to pay $14.50 for Media General, a 30% premium over Friday’s close.Morning Brief: Tribune Media, Media General and TEGNA face having their local TV stations go dark on some cable systems as negotiations to reach new carriage deals falter There may be a cog in the wheel of the Meredith-Media General deal. 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.

The transaction we are proposing would be a transformational event for both Nexstar and Media General shareholders and would deliver superior, immediate and long-term value to Media General’s shareholders compared with Media General’s proposed acquisition of Meredith,” Perry Sook, Chairman, President and CEO of Nexstar, said in the company’s statement. “Our proposal provides a significant premium to Media General’s shareholders, including a cash component nearly equal to Media General’s current share price,” Sook said. “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. In 2012 it acquired 11 stations and Inergize Digital Media from Newport Television, and the following year bought several pother properties including Communications Corporation of America and other broadcast assets. 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. As is the usual practice in these negotiations, the TV provider has positioned the broadcaster as the bad guy (which it often is), attempting to ask for more money to retransmit the stations than the cable or satellite company is willing to pay. “Rest assured, we intend to keep your local Media General-owned broadcast station in your local DIRECTV line-up but, by law, must first receive permission from Media General,” DirectTV said to customers on its website. “Media General is threatening to block your station’s signal unless they receive more than double the current fees just to allow you to keep the same shows you’ve always had. Media General has briefly suspended its channels from other satellite and cable providers before, but our immediate goal is to resolve this matter behind-the-scenes without involving you.” Tribune Media, which is the broadcast side of the old Tribune Company, has no new deal with AT&T U-Verse.

Pro-forma for synergies, the combination would generate in excess of $450 million of annual free cash flow (averaged over two year cycles), which would be allocated for continued investment in the business and for deleveraging and other initiatives that enhance long-term shareholder returns. 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. This probably forced Apple to pivot from having its Apple TV announcement be more about apps, as well as its new Apple TV model, than about a new streaming service.

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. At the same time, your shareholders would own approximately 26% of the combined company, thereby providing substantial ongoing participation in a well-positioned pure-play broadcasting company led by a management team with a strong long-term record of shareholder value-creation. Despite the update, a couple of users have complained inside iTunes that the app is crashing, but overall the app has still received far more positive reviews than negative ones. “Starting on September 20, you will receive one audiobook credit as part of your monthly subscription to use toward any title in Scribd’s audiobook catalog,” Scribd’s CEO Trip Adler told subscribers online. “This change will not only allow us to continue to grow our audiobook catalog in a sustainable way, but will also allow us to focus on even more content deals and offerings we know you’ll love.” 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.

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. 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. Nexstar’s management team has achieved excellent results on behalf of our shareholders in the 12 years since Nexstar’s IPO and clearly highlight our management’s unwavering commitment to the creation of shareholder value. We have a sustained record of profitable digital media initiatives, unrivalled broadcast industry experience, a strong record of integrating acquired assets and extracting the value and synergies highlighted at the time transactions were announced, an industry-leading position with respect to MVPD and network relationships, and a notable record of creating award-winning programming and content in the markets where we operate.

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. Nexstar owns, operates, programs or provides sales and other services to 107 television stations and related digital multicast signals reaching 58 markets or approximately 18.0% of all U.S. television households. Nexstar’s portfolio includes affiliates of NBC, CBS, ABC, FOX, MyNetworkTV, The CW, Telemundo, Bounce TV, Me-TV, LATV, RTV, Estrella, This TV, Weather Nation Utah, Movies! and News/Weather.

Nexstar’s community portal websites offer additional hyper-local content and verticals for consumers and advertisers, allowing audiences to choose where, when and how they access content while creating new revenue opportunities. In furtherance of this proposal and subject to future developments, Nexstar (and, if a negotiated transaction is agreed, Media General) may file one or more registration statements, prospectuses, proxy statements or other documents with the U.S.

Investors and security holders will be able to obtain free copies of these documents (if and when available) and other documents filed with the SEC by Nexstar or Media General through the web site maintained by the SEC at http://www.sec.gov. Forward-looking statements include information preceded by, followed by, or that includes the words “guidance,” “believes,” “expects,” “anticipates,” “could,” or similar expressions.

For these statements, Nexstar claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

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