Media General Rejects Nexstar’s $16.31 Bid

Nexstar Broadcasting Group today said that it has reached “an impasse” in its negotiations to acquire Media General Inc. following the rejection by Media General’s board of Nexstar’s revised bid of $16.31 per Media General share, based on Nexstar’s closing share price on Dec. 8.

Nexstar’s revised proposal consists of $11 per share in cash (less the value of the break fee liability of approximately $0.46 per share related to Media General’s Board’s agreement to acquire Meredith Corp., or a cash payment of $10.54 per Media General share) and a fixed exchange ratio of 0.1024 Nexstar shares per Media General share, up from the previous ratio of 0.0898.

The current Nexstar proposal represents a premium of 46.3% over Media General’s closing stock price on Sept. 25, the last trading day prior to Nexstar’s initial offer being made public.

Nexstar said “Media General’s board has rejected Nexstar’s revised offer, which also included an agreement in principle to offer a net contingent value right (CVR) that would provide Media General shareholders with cash based on the net proceeds received from the sale of its spectrum in the upcoming FCC auctions, less any benefit that Media General shareholders would otherwise be entitled to as Nexstar shareholders from the sale of Nexstar spectrum.”

Media General responded with a counter-proposal consisting of $11 per share in cash, Nexstar said, an exchange ratio of 0.135 Nexstar shares per Media General share and the CVR. Excluding the value of the CVR, the current value of Media General’s counter-proposal is $18.61 per Media General share, representing a premium of approximately 66.9% over Media General’s closing share price on Sept. 25 and an enterprise value multiple of approximately10.6x Media General’s projected blended 2015-2016 EBITDA.

“Despite strong support from Media General shareholders for our past proposals, we have reached an impasse in our negotiations to acquire Media General as their board has again rejected our very compelling offer and responded with an unrealistic counter proposal,” said Perry Sook, chairman, president and CEO of Nexstar. “The response from Media General is disappointing as our revised offer reflects our recent confirmation of our projections for first year synergies and our continued focus on structuring a transaction that would enable the combined company to generate prodigious free cash flow that would be allocated for leverage reduction, additional strategic investments and the return of capital to shareholders.”

Sook continued, “Our current proposal is at the limits of reasonable multiples for Media General’s projected blended 2015-2016 EBITDA based upon analysts’ consensus estimates as well as recent precedent transactions in the broadcast sector. Our proposal also takes into consideration the fact that the Media General board, without negotiating in August with Nexstar on its original proposal to acquire the company for $17 per share, reached an agreement with Meredith which created a sizeable break fee liability amounting to $0.46 per share of lost value for Media General shareholders.

“The counter proposal from Media General is unreasonable. As a disciplined acquirer, we will only consummate a transaction that makes sense for both companies’ shareholders. Given factors such as the current interest rate environment and the impending commencement of high levels of political advertising, time is of the essence and further delays in reaching reasonable terms for a transaction could impact the value creation we outlined at the time we announced our original proposal.

“We believe Media General shareholders will be disappointed with their board’s unreasonable negotiating position given the immediate and long-term strategic and economic benefits a combination with Nexstar would provide, and that they will urge Media General to engage with us to reach a transaction on reasonable economic terms.”

Wells Fargo analyst Marci Ryvicker said in a post this morning that she expects Media General and Meredith will proceed with their deal as it currently stands — “although we have a hunch that the Nexstar-Media General saga is not totally over. We think a lot of what we are reading is just negotiating in the press. If that’s the case, then our sense is the two shake out somewhere in between the $16.30 and $18.60 options, at which point Meredith might somehow try to squeeze its way in, as a few investors have suggested (but which many just don’t believe).”