If Media General rejects its bid, Nexstar will circumvent the board and management and take its case directly to shareholders, say the securities analysts in a note to clients. In doing so, they add, it could up its bid from $14,50 to $17 a share to get the job done.
If Nexstar Broadcasting’s $4.1 billion bid to buy Media General is rebuffed by the Media General board, Nexstar will “go hostile” and take its case directly to Media General shareholders, says Wells Fargo Securities.
“We went back and listened to the [Nexstar’s] transaction call … a second and third time — and it is clear to us that the [Nexstar] board and management team ‘will become more aggressive’ should talks with [Media General’s] board and management team not progress — or happen at all,” it says.
However, it also says, it assumes Media General board and management will respond to Nexstar and perhaps start negotiating. “We aren’t saying that they will choose [Nexstar] — we are just saying that they should at least start the conversation.”
The Well Fargo analysts were not so sure that Nexstar’s bid of $14.50 per share would be enough to get the job done.
“The feedback we have gotten here has been mixed,” the note says. “On the one hand, it’s hard for some shareholders to get over the $17/share offer that Nexstar made for Media General back in August of 2015.
“But on the other hand, the premium currently offered is actually slightly better than it was back in August (+23% on 8/10 v. +30% on 9/25). And with the market sliding, Nexstar’s own stock sliding, and Media General’s stock under $10/share as recently as 9/14 because of the MDP deal — the $14.50/share makes a lot of sense.”
But if it had to, Nexstar could raise its back to $17, the note says. “We ran the numbers (assuming a sale of the divestiture stations rather than a swap) — and upon conclusion, we have to say, yes — a transaction struck at $17/share would still be very accretive.”
Nexstar’s play for Media General came on the heels of Media General’s agreement to buy Meredith for $2.4 billion, which, according to Wells Fargo, was likely intended to stave off a Nexstar takeover.”
Wells Fargo compared the two deals — Nexstar/Media General and Media General/Meredith — and for found Nexstar/Media General to be “more accretive” in terms of free cash flow and equity.