Sook: Nexstar’s Working On Two Deals

Perry Sook, president-CEO of Nexstar, raised eyebrows and pulse rates during this morning’s earnings conference call with analysts when he mentioned two deals in the pipeline.

When Barry Lucas, Gabelli & Co. analyst, sought to draw Sook out, asking whether the deals were “bigger or smaller than a breadbox,” Sook implied they were bigger, depending on whose breadbox it is.

“The acquisitions we have pending would get into the relatively low nine-figure amount,” he said. “We feel there’s a relatively robust pipeline of non-brokered, non-auction deals.”

One of those pending deals may be for Granite Broadcasting Corp.’s 10 stations, which include an independent in San Francisco (DMA 6) and an unaffiliated in Detroit (DMA 11).

Perhaps more important, it has stations in multiple markets where Nexstar already owns broadcast properties. Those include Fresno, Calif. (DMA 55); Syracuse, N.Y. (DMA 84); Fort Wayne, Ind. (DMA 109); Peoria, Ill. (DMA 116); and Binghamton, N.Y. (DMA 157).

Earlier in the call Sook noted that Nexstar has about $500 million available to make accretive deals without substantially affecting its 4.7-times debt-to cash flow multiple. The Granite stations appear to fit the criteria.

Moreover, Granite is run by the same management that oversaw Communications Corp. of America. Nexstar acquired CCA’s 19 stations in 10 markets earlier this year for $270 million.

That deal boosted Nexstar’s duopolies to 33. Acquisitions that produce duopolies are a leading criteria in today’s M&A market because, typically, they are immediately accretive and yield synergies that are greater than buying stations in new markets.

There has been some speculation in financial circles that Nexstar itself could be an acquisition target. That appears unlikely, at least for the moment.

The M&A market is likely to remain lively overall, and for Nexstar, for some time, Sook said.

He broke the sector into multiple boxes: “Downstream shuffling of stations; a small group of companies that are on the bubble — should I stay or should I go” — and the remaining dozen or so large companies that could produce what Wells Fargo analyst Marci Ryvicker has characterized as mergers of equals.