Nexstar-Media General: It’s A Done Deal

Nexstar Broadcasting Group and Media General have entered into a definitive merger agreement whereby Nexstar will acquire all outstanding shares of Media General at $17.14 per share in cash and Nexstar stock, it was announced this morning.

The price represents a 54% premium over the closing share price of Media General on Sept. 25, 2015, the last trading day prior to Nexstar announcing its interest in acquiring Media General.

The deal also entitles Media General shareholders to any proceeds from the sale of Media General’s spectrum during the FCC’s incentive auction this spring.

The deal is valued at $4.6 billion, including assumption of Media General debt, and is subject to regulatory (FCC and Department of Justice) and shareholder approval.

With 171 full-power television stations in 100 markets, Nexstar Media Group, as the new company will be known, will reach approximately 39% of all U.S. TV households.

Nexstar Media will generate annual revenue of $2.3 billion, with more than $800 million in EBITDA and some $500 million in free cash flow ($10.50 per share).

Nexstar promised synergy of $76 million in the first year from three sources: corporate overhead ($27 million), retransmission consent fees as Nexstar begins billing MVPDs at its higher rate ($24 million) and operational savings ($25 million).

Wells Fargo securities analysts pegged the seller’s multiple at 10X and the buyer’s multiple at 8.5X.

The Nexstar-Media General deal follows the termination of a competing merger proposal between Meredith Corp. and Media General.

Meredith will receive the $60 million termination fee. In addition, Meredith will receive an opportunity to negotiate for the purchase of certain broadcast and digital assets currently owned by Media General.

Upon closing, the transaction is expected to be immediately accretive to Nexstar’s operating results, assuming expected financial and operating synergies and the planned divestiture of certain assets, Nexstar said.

Upon completion of the transaction, expected late in the third quarter/early in the fourth quarter of 2016, Media General and Nexstar shareholders will hold approximately 34% and 66%, respectively, of the combined company’s outstanding shares.

The transaction is not subject to any financing condition and Nexstar has received committed financing for the transaction totaling $4.7 billion from BofA Merrill Lynch, Credit Suisse and Deutsche Bank.

Perry Sook, Chairman, president-CEO of Nexstar, commented, “The acquisition of Media General’s broadcasting and digital media assets represent a transformational growth opportunity for Nexstar and is strategically and financially compelling. The transaction increases Nexstar’s broadcast portfolio by approximately two thirds with very limited overlap with our existing properties, more than doubles our audience reach, provides entrée to 15 new top-50 DMAs and offers synergies related to the increased scale of the combined digital media operations.

“Financially, the transaction is expected to more than double our revenue and adjusted EBITDA and result in over $500 million of annual free cash flow which we intend to allocate to leverage reduction, additional strategic growth investments and the return of capital to shareholders.

Importantly, Nexstar Media Group’s annual free cash flow per share is expected to exceed $10.50 per year over the 2015/2016 period, marking an approximate 34% increase in Nexstar’s pro-forma 2015/2016 free cash flow per share from Nexstar’s current pro-forma 2015/2016 free cash flow per share of $7.85.”

Vincent L. Sadusky, President and CEO of Media General, said, “I look forward to working closely with the Nexstar team to bring our companies together to realize the power of this compelling combination and ensure a smooth transition.”

For more on Nexstar’s perspective of the deal, click here.