Meredith ‘Aggressively’ Looking For Stations

The television side of multimedia Meredith Corp. enjoyed a great fiscal 2Q 2016 (calendar 4Q) — as long as the political advertising category is ignored. And while the company failed to close on its proposed merger with Media General, it has not exited the M&A market as a buyer — anything but.

In the quarter, increase in local non-political advertising was strong, almost 10% to $103.6 million. This was in no way good enough to offset the lack of political, however, which fell from $29.3 million to $789,000. Other revenues increased by $3.6 million, resulting in an overall loss of about $7.5 million.

Meredith earned $60 million for the simple act of not buying Media General. Its proposed merger with Media General was undercut by an unsolicited counteroffer from the Perry Sook’s ultra-acquisitive Nexstar Broadcasting, and after months of negotiations, Meredith elected to leave the table and accept the termination fee. On a call with securities analysts this morning, Meredith CEO Steve Lacy said that cash is already in the bank.

Nexstar won Media General with an offer of $17.14 per share or $4.6 billion including assumption of debt.

Lacy explained that the original agreement with Media General made a lot of sense for Meredith, and so did Meredith’s updated offer made in January. However, matching Nexstar’s final offer would not have been favorable to Meredith shareholders.

The failure to acquire Media General has in no way dampened Meredith’s thirst for acquisitions, and that includes “a handful ” of stations that Nexstar will have to spin off to comply with the FCC’s local ownership limits. As part of its breakup arrangement, Meredith gets first dibs on those stations.

“We will continue to be aggressively on the outlook,” said Lacy in regards to the company’s plans for hunt for more stations. Discussing the company’s options, Lacy added, “We have a lot of levers to pull and we intend to pull them.”

On the company’s acquisition strategy, Lacy said Meredith has a “hit list” with potential sellers that it is working on.

Meredith has relatively low debt, which will facilitate its ability to act on opportunities.

Despite his enthusiasm, Lacy said he expects that station trading with be slow until after the FCC incentive auction.

Meredith did not tip its hand as to what stations or markets are on its shopping list, either from the Nextar-Media General portfolio or from any other potential trading partner.

Local Media Group President Paul Karpowicz said the company’s outlook for 2016 is good. While its top-end hope for a gain of $3.25 per share is unchanged from an earlier prognostication, it has increased the lower end of the earnings range expectation from $2.90 to $3.05.

As usual in an even-numbered year, robust political advertising opportunities will fuel 2016 success. And as is the case for most television groups, cash from retransmission consent contracts — a revenue stream largely immune from the ups and downs of the volatile advertising stream — will continue to pay increased dividends.

Meredith says that at the end of the day, revenue increases for its local media division will be in the low-double-digit range.