Nexstar to fund $4.1 billion offer for Media General with loans, bonds

By Lisa Kerner

Charlotte, N.C., Sept. 28 – Nexstar Broadcasting Group, Inc. executives discussed the company’s proposal to acquire Media General, Inc. for $14.50 per Media General share, or $4.1 billion including the assumption of debt, during a conference call on Monday.

Nexstar’s $14.50 per share offer is comprised of $10.50 per share in cash and a fixed exchange ratio of 0.0898 Nexstar shares per Media General share, according to executive vice president and chief executive officer Tom Carter.

“From a capital structure perspective, the cash consideration and the Meredith break-up fee, which we estimate to be approximately $0.50 per share of Media General stock, will be funded via new loans and bonds with an approximate closing leverage of 5.5 times based on a mid-year close in 2016,” Carter said on the call.

The cash component of Nexstar’s offer is nearly equal to Media General’s current share price and Nexstar expects to have committed financing in place by the transaction’s close, which would be expected to occur in mid-2016, said president and CEO Perry Sook.

Nexstar said it has received a highly confident letter from BofA Merrill Lynch, its financial advisor on the proposed transaction, confirming the company’s ability to secure the required financing.

Superior proposal

Sook said Nexstar’s proposal is “vastly superior” to Media General’s plan to acquire Meredith Corp.

On Sept. 8, Media General announced a definitive agreement to Meredith in a cash-and-stock transaction valued at about $2.4 billion, or $51.53 per share.

Media General rejected Nexstar’s previous Aug. 10 offer.

Sook said Nexstar’s new offer is “a financially compelling transaction with approximately $840 million of broadcast EBITDA post synergies and divestitures, that’s on over $3.2 billion in revenues.”

First-year synergies are expected to be $75 million, and Nexstar is prepared to address overlap in seven markets should the deal be completed.

Several shareholders on the call expressed support for Nexstar’s proposal versus Media General’s plan to buy Meredith. Nexstar’s proposal requires shareholder approval on both sides, Sook said.

In its proposal to Media General, Nexstar cited a Sept. 14 Wells Fargo research report that indicated investors are unhappy with the proposed Meredith transaction and that Nexstar could make a counter bid, according to a news release.

According to the report, “Investors...seem both confused and disappointed. According to our conversations, they feel that [Media General] should not be re-entering the publishing space, that the price for [Meredith] is too high, and that the timing is just “strange.” It sounds to us like top holders of [Media General] (and some of [Meredith]) are planning to vote this deal down in the hope that another company comes in to bid (most peg [Nexstar]).”

Nexstar is an Irving, Texas-based diversified media company.

Media General is a Richmond, Va.-based television broadcasting and digital media company. Meredith is a Des Moines, Iowa-based media and marketing company.

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