Shareholders "seem both confused and disappointed," writes analyst Marci Ryvicker. "According to our conversations, they feel that MEG [Media General] should not be re-entering the publishing space, that the price for [Meredith] is too high, and that the timing is just 'strange.' "
Wells Fargo: Meredith Deal May Be In Trouble
Having met with broadcast investors in New York late last week, Marci Ryvicker’s wing of Wells Fargo Securities concludes that shareholders may oppose Media General’s $2.4 billion bid for Meredith.
“Investors … seem both confused and disappointed,” the Wells Fargo note says. “According to our conversations, they feel that MEG [Media General] should not be re-entering the publishing space, that the price for MDP [Meredith] is too high, and that the timing is just ‘strange.’ “
Meanwhile, the broadcasters with whom Wells Fargo spoke said that they were not surprised by the deal, that Meredith was being “shopped around.” They also “just loved” the multiple that is being attached to Meredith’s stations — 11.5 times broadcast cash flow, the note says.
“It sounds to us like top [share]holders of Media General and some at Meredith are planning to vote this deal down….”
Wells Fargo’s other takeaways from its meetings with broadcasters:
- Most broadcasters are “up to their eyeballs” in incentive auction simulations — that is, devising auction strategies and figuring out where it might make sense to channel share.
- Broadcasters have “zero” concern about the FCC’s new proceeding to rewrite the retrans good-faith bargaining rules. “[N]o real action is expected to be taken for a very, very long time — if at all.”
- Spot advertising trends are improving, mostly because of auto and political.
- Unlike cable networks, broadcasters have experienced no erosion in their sub base.
- Apple has had no discussions with the network or affiliates about including broadcast signals in its anticipated OTT linear TV service.