TV Merger Triangle Unfolds

MULTIPLE CITIES— The drama involving Media General, Nexstar and Meredith unfolded in successive press releases Thursday morning that read as if the bride switched grooms on the fly. The upshot is that Nexstar and Meredith want to marry, and Meredith will get $66 million if it lets them. The flurry of press releases also confirmed that Nextstar and Meredith plan to participate in the spectrum incentive auction.

Meredith and Nexstar have been courting Media General since last fall in one of the most push-pull merger deals yet in broadcasting. In mid-September, Media General agreed to merge with Meredith in a deal valuing Meredith at $2.4 billion, and creating a group of 88 TV stations in 54 markets reaching 30 percent of U.S. TV households.

Two weeks later, Nexstar swooped in with an unsolicited $4.1 billion offer for Media General, urging it to pull out of the “value-destructive” deal with Meredith. (See “Media General to Consider Nexstar's $4.1 Billion Bid,” Sept. 28, 2015) A combined Nexstar and Media General comprised 162 TV stations in 99 markest reaching 39 percent of U.S. TV households.

Meredith agreed to let Media General parse Nexstar’s offer, but it refused to step aside.

Meanwhile, Media General came back to Nexstar in early December and told it to do better than its initial offer of $10.50 a share. Based on Nexstar’s share price at the time, Media General said $16.31 was more like it, and closer to the $17 per share offer Nexstar laid on the table in August that Media General rejected.

Nexstar wasn’t budging, according to Media General:

“Nexstar refuses to properly price the combination and materially improve its view on value,” read the Dec. 9 Media General statement.

It said the board remained “open to discussing and reviewing an improved proposal from Nexstar,” but that it was “unclear from Nexstar’s press release if its current proposal is indeed its best and final proposal,” and that the board continued to recommend “the proposed transaction with Meredith.”

Cut to Thursday, Jan. 7, shortly after 9 a.m. Eastern. Media General announces that Nexstar is acquiring it for a cash-share equivalent of $17.66 per share, plus a “contingent value right” for spectrum sold at auction. (Confirming Media General’s intention to participate. The deadline for doing so is next Tuesday.) Media General shareholders would get 33.4 percent of outstanding Nexstar shares.

But only if the Meredith agrees: “Because the Meredith-Media General merger agreement has not been terminated, there can be no assurance that any transaction with Nexstar will result (or the terms or timing thereof).”

Meanwhile, Meredith cancels it planned participation in the Citi 2016 Internet, Media & Telecommunications Conference in Las Vegas, a who’s who of sector CEOs and senior executives, analysts and business reporters. No reason was given, just a litany of Meredith assets—17 owned or operated stations reaching 11 percent of U.S. households, seven in the top 25 markets, 650 hours of local news produced, etc. Plus, a note about having paid a dividend for “68 straight years and increased it for 22 consecutive years.”

It quickly followed with a proposed “merger of equals” that it said valued Media General shares at $20, or $3 more than Nexstar, plus the spectrum bonus plus a dividend.

Wells Fargo’s Marci Ryvicker boiled down the basics:

“As far as Nexstar and Media General are concerned, their deal is negotiated; there is really no more discussion to be had,” she wrote in an analyst’s note. “Both companies can and intend to participate in the incentive auction.”

Further, she said, Nexstar was expected to file a merger agreement with the FCC on the day of the announcement, Thursday, Jan. 7.

In the meantime, Meredith’s proposal has to get past a vote by its shareholders, presumably next month. If they turn it down, Meredith gets a $60 million break-up fee if and Nexstar gets Media General.