Nexstar Still On The Hunt For Acquisitions

A day after announcing two deals to acquire five more television stations, bringing the total of pending acquisitions to 17, Nexstar Broadcast Group President-CEO Perry Sook isn’t ready to stop. As he discussed third quarter record results with Wall Street analysts, Sook indicated that more deals might be coming.

Having recently refinanced its balance sheet with both a new senior loan package of $445 million and a $250 million bond sale, Sook said the company now enjoys a lower cost of capital and additional flexibility. “Which allows us to more efficiently look at acquiring other stations in similarly accretive transactions,” the CEO told analysts.

The pending purchase of 12 stations from Newport Television for $285.5 million is projected to add $55 million of EBITDA to Nexstar in 2013, Sook said. That deal is scheduled to close on Dec. 1.

Just yesterday Nexstar announced two additional deals to acquire three stations in Fresno and Bakersfield, Calif., from Newport for $35.4 million and two in Burlington, Vt., from Smith Media for $17.1 million. Sook said those are expected to close in 1Q of 2013 and add $10 million of pro forma 2013 EBITDA.

The CEO called the latest deal with Newport “opportunistic.” Although Newport had not officially announced a previous deal, Sook said a buyer had been lined up, but they failed to obtain financing.

“As we oftentimes say, we may not be the highest price, but we can get to the finish line,” Sook said of moving back into the deal where his company had originally been outbid.

That led to Aaron Watts of Deutsche Bank asking whether Sook is still likely to have offering books come across his desk for even more opportunities.

“In a word, yes. We have a couple of books on our desk at this point that we’re evaluating. But again, we’ve set a fairly high bar for ourselves in terms of the accretive nature which will make us very disciplined and opportunistic in what we can pay,” Sook said.

Without providing specific numbers for 4Q, the CEO told investors and analysts that core business is pacing ahead following today’s election, which brought Nexstar a total political ad take in the mid-$40 millions range.

“I look at our top 10 and our top 15 categories and they’re pacing ahead of where we had business on the books for the prior year,” Sook said.

“November is better than October — that’s probably logical, due to crowding out by political — but December is better than November by a not-inconsequential margin. If these trends hold, it looks like we will finish the year strong on a core revenue basis and we think that paints a very good foundation on core revenue growth for 2013,” he added.

Sook also had some interesting color on why national was up 18.4% in 3Q, while local gained only 3.2%, taking core (excluding political) up 7.4%.

“Gulf States Toyota [a five-state regional distributor], which heretofore bought in the Southwest as a local account, moved to an agency that places the business nationally,” Sook explained. Same account, different category.

Nexstar is also bullish on retransmission consent revenues. Sook noted that the company’s existing contracts with cable and satellite companies have price escalators which kick in on January 1, 2013. Meanwhile, only about a dozen of Nexstar’s retrans contracts come up for renewal in 2013, and none of them with major distributors, so it’s almost like a year off on the negotiating side.