If Media General rejects its bid, Nexstar will circumvent the board and management and take its case directly to shareholders, say the securities analysts in a note to clients. In doing so, they add, it could up its bid from $14,50 to $17 a share to get the job done.
Wells Fargo: Nexstar Prepared To ‘Go Hostile’
If Nexstar Broadcasting’s $4.1 billion bid to buy Media General is rebuffed by the Media General board, Nexstar will “go hostile” and take its case directly to Media General shareholders, says Wells Fargo Securities.
“We went back and listened to the [Nexstar’s] transaction call … a second and third time — and it is clear to us that the [Nexstar] board and management team ‘will become more aggressive’ should talks with [Media General’s] board and management team not progress — or happen at all,” it says.
However, it also says, it assumes Media General board and management will respond to Nexstar and perhaps start negotiating. “We aren’t saying that they will choose [Nexstar] — we are just saying that they should at least start the conversation.”
The Well Fargo analysts were not so sure that Nexstar’s bid of $14.50 per share would be enough to get the job done.
“The feedback we have gotten here has been mixed,” the note says. “On the one hand, it’s hard for some shareholders to get over the $17/share offer that Nexstar made for Media General back in August of 2015.
“But on the other hand, the premium currently offered is actually slightly better than it was back in August (+23% on 8/10 v. +30% on 9/25). And with the market sliding, Nexstar’s own stock sliding, and Media General’s stock under $10/share as recently as 9/14 because of the MDP deal — the $14.50/share makes a lot of sense.”
BRAND CONNECTIONS
But if it had to, Nexstar could raise its back to $17, the note says. “We ran the numbers (assuming a sale of the divestiture stations rather than a swap) — and upon conclusion, we have to say, yes — a transaction struck at $17/share would still be very accretive.”
Nexstar’s play for Media General came on the heels of Media General’s agreement to buy Meredith for $2.4 billion, which, according to Wells Fargo, was likely intended to stave off a Nexstar takeover.”
Wells Fargo compared the two deals — Nexstar/Media General and Media General/Meredith — and for found Nexstar/Media General to be “more accretive” in terms of free cash flow and equity.
Comments (6)
Lidia McCall says:
October 1, 2015 at 9:28 am
The LAST thing our industry needs is MORE Nexstar stations!
joanne gauvin says:
October 1, 2015 at 11:59 am
I second that!
Lance Vitanza says:
October 1, 2015 at 10:39 am
The MG and newly acquired Meredith stations are truly outstanding stations with the local markets they serve. If Nexstar becomes the owner/operator, likely the value of each individual station will plummet as Nexstar rarely seems to concern itself with quality local news/programming, brand promotion, and key elements that make an average station great and of true “value”. While MG stock holders would be silly to be lured by a shinny penny, Nexstar stock holders should be concerned as well. One thing Nexstar needs to learn I suspect is that “big” does not make you “good”. There’s a difference.
Gene Johnson says:
October 1, 2015 at 11:50 am
There is a difference between a “good” station from the perspective of the audience, and the operator’s shareholders. Their interests are not the same. Nexstar’s primary concern is for its shareholders and it uses an operating method that it thinks is most beneficial to them. Other companies don’t take the same approach. Different approaches result in different levels of service provided to the audience (not consumers, as the consumers of TV service are advertisers – the audience is the product, and programming is the method by which stations deliver the product to its consumers). Not having a local Nexstar station to view I can’t comment on the quality of service Nexstar stations provide to the audience. But, we must remember the nature and structure of the industry. From Nexstar’s, and its shareholders’ perspectives, bigger may make it good, even if that’s not true from the audience’s perspective.
Mike Stroot says:
October 1, 2015 at 1:07 pm
Sadly, Television is following in the footsteps of Radio. I ask, “Where is ‘in the public interest’ for these mega media entities and not in the shareholders interest? It’s the the old ‘can’t see the forest for the tree’ syndrome. There has to be a balance in the minds of these ‘boards’ between providing shareholder value and serving the public interest. If stock price and amassing profits is the driving force, take it from Cumulus and IHeartMedia there’s a point of diminishing returns with this focus and you’ll have to pull back or die. We’ve already seen it. Take a lesson.
Greg Johnson says:
October 2, 2015 at 11:04 pm
There are some good points about stakeholder values here. Every company is entitled to its own style. How styles end up impacting the competitive advantage for a company is important. The merger mania rarely discusses that competitive advantage being product improvement. If this spectrum auction ,implodes and I for one hope it does and the politicians figure out how to utilize CRM, programmatic TV buying or just shifting to digital, the broadcasting business will be back on the edge of the cliff and blaming someone else for their woes. There is a lot of egos getting bigger. The TV business has lost its luster as the place young college graduates aspire to work. Who is responsible? I guess history will tell that story.