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Nexstar Sale Trial Balloon Boosts Shares

IRVING, TEXAS: Nexstar share prices shot up from around $7.20 yesterday to around $9.40 in today’s trading on the news that the company retained advisors to explore a possible sale. The TV station group’s board announced today that it hired Moelis & Co. as financial advisor and Kirkland & Ellis LLP as legal counsel.

“The company has not made a decision to pursue any specific strategic transaction or other strategic alternative, and there is no set time table for the process, so there can be no assurance that the exploration of strategic alternatives will result in a sale of the company or any other transaction,” the board’s announcement said. “The company does not intend to disclose developments with respect to the progress of its strategic review until such time as the board has approved a transaction or otherwise deems disclosure appropriate.”

Nexstar owns and/or operators 65 TV stations in 36 markets in 16 states, reaching approximately 11.6 percent of U.S. TV households. Market cap this morning was $265 million based on the boosted share price. Total debt as of March 31, 2011 was $642.5 million, assets totaled $562.6 million. The Wall Street Journal notes that Nexstar has not posted a profit in 10 years, but that its 2010 revenues were up 24 percent from 2009. WSJ estimates enterprise value at $800 million, for a potential sale price of $1 billion.

The company’s stations have been in the news lately over a stand-off with Fox for demanding a split of retransmission proceeds. Nexstar’s WFXW-TV in Terre Haute, Ind., is switching from Fox to ABC Sept. 1, Multichannel News reports. Nexstar’s WFFT-TV in Fort Wayne is becoming an independent on Aug. 1. Nexstar stations in Springfield, Mo., and Evansville, Ind., also are splitting the sheet with Fox.

Nexstar was founded in 1996 by CEO Perry Sook with the goal of amassing TV stations in mid-sized markets, the first being WYOU-TV in Scranton, Penn. It went public in 2003, and hired Goldman Sachs to explore a sale in May of 2007, but cancelled the strategy in the midst of the credit crisis.

Today’s announcement brings the number of TV station groups for sale up to four. Freedom Communications and Young Broadcasting stations are on the block, as well as McGraw-Hill’s. Multimedia company McGraw-Hill announced in June that it retained Morgan Stanley & Co. to pursue a sale of its TV stations--ABC affiliate KMGH-TV in Denver; KGTV-TV in San Diego, Calif.; KERO-TV in Bakersfield, Calif.; and WRTV-TV in Indianapolis; as well as Azteca America affiliates in Denver, Fort Collins, Colorado Springs, San Diego and Bakersfield. Price Coleman of TVNewsCheck estimates that sale could bring as much as $200 million. The Street reported today that McGraw-Hill shares (NYSE: MHP) hit a new 52-week high of $44.41.

Wells Fargo’s Marci Ryvicker said the station sales were good news for the sector.

“While there is significant supply we believe potential bidders will include both strategic and private equity groups--both of which we believe are looking hard at these assets,” she wrote.

~ Deborah D. McAdams, Television Broadcast