Media General Rejects Nexstar Bid, Recommends Meredith Merger

  • Nexstar `refuses to properly price' deal: Media General says
  • Proposal `at the limits of reasonable multiples,' Nexstar says

Media General Inc. rejected a takeover offer by Nexstar Broadcasting Group Inc. of about $2.1 billion, saying it falls short and doesn’t take into account projections for future growth of the TV-station owner.

Nexstar, whose cash-and-stock offer is valued at $16.31 a share based on its Dec. 8 closing price, said in a statement Wednesday that Media General made an “unreasonable” counter proposal for $18.61 a share. Media General, in a statement after markets closed, made no mention of the counteroffer and said its board continues to recommend the planned merger with Meredith Corp., another TV-station owner.

“Nexstar refuses to properly price the combination and materially improve its view on value,” Media General said. “Our business is gearing up towards a strong 2016 political year and promising retransmission repricings, which are a big source of growth in our projected cash flows,” the company said, referring to the fees charged to pay-TV providers like Comcast Corp. for the right to carry Media General stations.

Media General also said that Nexstar failed to improve on an original $17-a-share bid earlier this year. Nexstar lowered that inital offer due to a market selloff, people familiar with the matter have said.

An e-mail sent to Nexstar seeking comment on Media General’s statement wasn’t immediately answered.

More to Come?

Nexstar’s bidding may not be over, Wells Fargo analyst Marci Ryvicker said in a note to clients.

“Our sense is the two shake out somewhere in between the $16.30 and $18.60 options,” Ryvicker wrote, “at which point Meredith might somehow try to squeeze its way in.”

Media General’s stock, which trades about 11 percent lower than Nexstar’s bid, suggests that investors don’t anticipate a higher offer. Media General said in the statement it asked Nexstar in a Dec. 6 letter to provide its best and final offer.

“It is unclear from Nexstar’s press release if its current proposal is indeed its best and final proposal,” Media General said.

Its board remains open to discussing and reviewing an improved proposal, according to the statement.

Nexstar made a move on a company that’s bigger than itself to try to break the broadcaster’s agreement to acquire Meredith. A combination with Media General would own 162 TV stations and reach 39 percent of U.S. TV households, according to Nexstar. Local broadcasters have seen a lot of consolidation in recent years. They seek to get bigger to gain bargaining power with pay-TV providers and be able to charge higher retransmission fees for the right to carry their stations.

“Our current proposal is at the limits of reasonable multiples,” Nexstar Chief Executive Officer Perry Sook said in the statement.

Nexstar fell 3.9 percent to $54.17 at the close in New York. Media General dropped 0.7 percent to $14.48, while Meredith gained 1.4 percent at $46.26.

Nexstar, Media General and Meredith specialize in operating local affiliates of broadcast networks including 21st Century Fox Inc., CBS Corp., Comcast’s NBC and Walt Disney Co.’s ABC. Meredith spokesman Art Slusark declined to comment.

In 2013, Gannett Co. agreed to buy Belo Corp. for about $1.5 billion, while Media General itself bought New Young Broadcasting Holding. In September, Media General agreed to buy Meredith in a cash and stock deal valued at about $2.4 billion. The new company would have been led by Meredith’s Chief Executive Officer Steve Lacy and called Meredith Media General. 

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