Nexstar, Mission Buying 5 Stations For $103M

Nexstar Broadcasting Group announced today that it and Mission Broadcasting entered into definitive agreements to acquire five television stations in four markets for total consideration of $103.25 million in transactions that are expected to be immediately accretive in the first full year of operations following closing.

Under the terms of the purchase agreements, Nexstar will acquire stations in Des Moines, Iowa, Rock Island, Ill., and Sioux City, Iowa from entities related to Citadel Communications for $88 million and will immediately begin operating the three stations under a time brokerage agreement.

The Des Moines station will be acquired pursuant to a stock purchase agreement while the Rock Island and Sioux City station acquisitions are structured as asset purchase agreements.

Mission will acquire two stations in Binghamton, N.Y., from Stainless Broadcasting. for $15.25 million in a transaction structured as an asset purchase agreement. The acquisitions will be funded through internal sources, borrowings under the existing credit facilities and future credit market transactions.

The stations included are:

Station (DMA rank)                    Affiliation      Seller

WOI Des Moines, Iowa (72)               ABC       Citadel Communications

WHBF Rock Island, Ill (99)                 CBS       Citadel Communications

KCAU Sioux City, Iowa (147)              ABC       Citadel Communications

WICZ Binghampton, N.Y. (157)           Fox       Stainless Broadcasting

WBNP-LP Binghampton, N.Y. (157)    MNT      Stainless Broadcasting

Nexstar said the planned station acquisitions “will further expand Nexstar’s local television broadcasting platform with stations that are geographically complementary to Nexstar’s operating base and present 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 96 stations in 51 markets reaching approximately 14.6% of all U.S. television households. Nexstar said it expects the deals to be completed early in the first quarter of 2014.

Nexstar added that “in the first 12 months following the closing of the transaction, the five acquired stations are expected to contribute approximately $35 million in incremental net revenue. Giving effect to approximately $3 million in projected synergies, the acquisitions are expected to generate over $17 million in additional broadcast cash flow and are expected to provide free cash flow accretion in the first year of approximately 5% over the levels expected to be generated by Nexstar’s existing operations and other previously announced acquisitions.”

The purchase price for the five stations represents a multiple of approximately 6.0 times the expected 2014 broadcast cash flow of the acquired stations after giving effect to anticipated operating improvements and synergies identified by Nexstar.

Perry A. Sook, chairman, president and CEO of Nexstar Broadcasting Group, commented: “Our and Mission’s planned acquisition of five stations in four markets builds further scale and operating and financial leverage and represents another excellent opportunity to expand our platform in attractive, highly complementary markets. These transactions are consistent with our criteria for acquisitions that are accretive to free cash flow, further strategically diversify our revenue and operating base, create opportunities for virtual duopolies and present significant synergies with well-defined paths to realization. Under Nexstar and Mission’s ownership the stations will realize additional retransmission revenues as well as synergistic operating improvements, and on a pro-forma basis the acquisitions will be accretive to results and leverage neutral on a debt-to-cash-flow basis.

“Pro-forma for the completion of the transactions announced today and other soon-to-be completed transactions, we believe Nexstar will generate free cash flow of approximately $315 million in the 2014/2015 cycle, representing an increase of approximately 5% over our prior expectations. This would amount to average pro-forma free cash flow of approximately $5.25 per share per year in the 2014/2015 period. Based on our current financing plans as well as the significant free cash flow to be generated following our other recent acquisitions, we continue to expect net leverage in the mid-3x level at year-end 2014.

“Additionally, these stations are an excellent complement to our existing station portfolio in terms of market size and geographic alignment with Nexstar’s existing operating hubs, while offering the potential to develop additional virtual duopolies. The acquisition of the Des Moines and Sioux City stations marks Nexstar’s entrée into Iowa, an important state for political advertising activity, while the Rock Island station also reaches Iowa and will benefit from efficiencies related to Nexstar’s existing operations in Illinois where we now operate or provide services to six stations. At the same time, Mission’s acquisition of two stations in Binghamton enhances our overall presence in central/western New York where we currently operate or provide services to ten stations.”

Mr. Sook concluded, “Nexstar’s ongoing operating execution combined with select accretive station transactions have positioned the Company to achieve record revenue and free cash flow in 2013 and beyond. In the current environment we expect to act on further opportunities to optimize our portfolio through additional strategic acquisitions, the creation of additional virtual duopolies, and select divestitures.”