Media General, the local TV station operator that is the object of a bidding war among competitors, said Thursday it has completed negotiations to be acquired by Nexstar Broadcasting Group after Nexstar raised its offer price to about $2.3 billion.
Soon after the announcement, Meredith Corp., the media company in Des Moines that also had an agreement to merge with Media General, said it sweetened its offer to Media General shareholders by offering “more than $20 per share in near-term value.” The offer includes $3.90 per share in cash, one share of the post-merger company, Meredith Media General, per each Media General share (representing $14.94 per share), and proceeds from the sale of Media General’s spectrum in the upcoming spectrum auction by the Federal Communications Commission.
Media General estimates that its spectrum assets could potentially be worth up to $4.29 per share in after-tax value.
Media General hasn’t commented on Meredith’s offer. But the Media General-Nexstar tie-up would create one of the largest local TV station operators in the country, underscoring consolidation in the industry triggered by rising prices for content from networks and technological changes in video delivery.
If If Nexstar can pull off the acquisition, the combined company would own 162 stations in 99 markets. Media General’s integration of Meredith’s assets would result in a smaller operator of 82 stations in 54 markets.
But Meredith holds a trump card in its battle with Nexstar. In its agreement with Meredith, Media General agreed to not enter into an agreement with another company unless the Meredith agreement has been terminated. Media General said it made “several proposals” to Meredith to terminate the agreement. The New York Post reported Thursday that Media General offered $60 million to Meredith and the option to buy two of its stations at market prices to sever their agreement, but Meredith CEO Stephen Lacy rejected it.
With Meredith unwilling to accept these offers, Media General can only proceed with Nexstar if the Meredith transaction is not approved by Media General shareholders at a meeting later this year.
Lacy reiterated his intent to uphold its rights. “Meredith’s board of directors still unanimously agrees that the September 8th merger agreement reached with Media General is in the best interests of shareholders,” said Lacy. “Enhancing Meredith shareholder value will remain our top priority as we move forward in this merger process.”
The bidding war began in September when Media General agreed last September to pay $2.4 billion in cash and stock to merge with Meredith. The deal called for Meredith shareholders to receive $34.57 in cash and 1.5214 shares of Meredith Media General for each share of Meredith.
Shortly after it was announced, Nextar, based in Irving, Texas, made an unsolicited bid to buy all shares of Media General for about $1.9 billion in cash and stock, an offer that was initially rejected by Media General as it had the Meredith agreement in place.
After pressure from some shareholders, Media General changed its mind two months later, announcing that it would enter into negotiations if Nexstar was willing to raise its price.
Nexstar’s first offer consisted of $10.50 per share in cash and 0.0898 Nexstar shares per each share of Media General. The offered valued Media General at $14.50 per share. The total transaction value was $4.1 billion, including Media General’s debt.
Nexstar’s latest offer would raise the cash component by a nickel to $10.55 per share in cash, as well as raising the stock component to 0.1249 of a share of Nexstar’s common stock for each Media General share. Its offer also includes proceeds from the spectrum auction. In total, the deal reflects a value of $17.66 per share plus the value of the spectrum, Media General said.
To get the deal approved, Nexstar said it would agree to sell some TV stations.