Nexstar Buys 4 North Dakota Stations

Nexstar Broadcasting Group on Thursday said it is purchasing four CBS-affiliated television stations serving the Minot-Bismarck-Dickinson-Williston, N.D. (DMA 139) for $44 million from Reiten Television Inc.

Nexstar said the deal is expected to be immediately accretive to Nexstar’s operating results upon closing.

In addition, under the terms of the agreement, Nexstar will provide sales and other services to the market’s two ABC affiliates owned by Forum Communications pursuant to Reiten’s services agreement with Forum.

Nexstar said it intends to finance the transaction with cash generated from operations and borrowings under its senior credit facilities.

The Minot-Bismarck-Dickinson-Williston television DMA is benefitting from rapid economic expansion related to strong growth of the U.S. domestic energy production industry in the region. From 2006 to 2015 Nielsen’s market rank for Minot-Bismarck-Dickinson-Williston has ascended to DMA 139 from DMA 160, making it one of the fastest rising DMAs in the country. According to the 2014 BIA Kelsey Television Yearbook the Reiten television stations are the leading revenue share cluster in the market.

Nexstar said the purchase “further broadens Nexstar’s local television broadcasting and digital media platform with stations that are geographically complementary to the company’s operating base while presenting significant financial and operating synergies.”

Upon closing this and other previously announced transactions, Nexstar’s portfolio of stations that it owns, operates, programs or to which it provides sales and other services, will increase to 114 television stations serving 59 markets in 24 states, reaching approximately 20.4 million television households or 18.0% of all U.S. television households.

Commenting on the acquisition, Nexstar Broadcasting Group President-CEO Perry A. Sook said: “The Reiten transaction reflects the successful ongoing execution of Nexstar’s long-term growth strategy to opportunistically expand our broadcast station and digital media platform through accretive acquisitions. The Western North Dakota market is a natural complement to our existing operations in the Upper Midwest region of the United States and by adhering to our disciplined transaction criteria, we are acquiring a leading portfolio of market-leading television stations at an attractive pro-forma multiple of approximately 6.2 times average 2015/2016 adjusted broadcast cash flow, which is consistent with other recent Nexstar transactions. The Reiten family’s legacy in the North Dakota television business dates back nearly 60 years and consistent with our organization-wide operating focus we intend to build on their rich tradition of localized content and programming and community involvement.

“From 2009 to 2014 television and digital revenue in the Minot-Bismarck-Dickinson-Williston, North Dakota market have grown by 61% and Reiten’s operations have generated consistent revenue and broadcast cash flow growth, both year-to-date and on an historical basis. Under Nexstar’s ownership, Reiten’s financial results will benefit from our scale, proven operating disciplines, expense synergies and growing net retransmission revenues. In this regard, the acquisition, on a pro-forma basis, is expected to add an average of approximately $0.15 per share of free cash flow per year to Nexstar’s operating results over the 2015/2016 period.

“Nexstar’s consistent industry out-performance is the direct result of our disciplined operating approach, revenue diversification initiatives and the success we are achieving in identifying, efficiently financing and integrating selective accretive station acquisitions. Pro-forma for the completion of pending transactions as well as the year-to-date and continued strength in our operating results and approximately one million of share repurchases completed since the August 2015 authorization, we are increasing Nexstar’s projected 2015-16 free cash flow to approximately $467 million, or average pro-forma free cash flow of approximately $7.62 per share per year, in this two year period based on the current share count.

“Since the August 2015 authorization to repurchase up to $100 million of Nexstar shares, the company has repurchased approximately one million shares at an average purchase price of approximately $48.10 per share. We believe repurchasing shares at recent levels underscores our confidence in the company’s long-term prospects based on visible organic and M&A-related growth opportunities. At the same time, our growing free cash flow affords us the financial flexibility to continue pursuing additional accretive transactions, while simultaneously reducing leverage and returning capital to shareholders through the quarterly cash dividend and share repurchases.”

The transaction is subject to FCC approval and other customary approvals, and is expected to close in the late 2015 or early 2016. Kalil & Co. served as the broker for the seller.