Nexstar Broadcasting Inc. ( NXST ) announced today a proposal to acquire Media General Inc. ( MEG ) for $10.50 per share in cash and a fixed ratio of 0.0898 Nexstar shares per Media General share. This proposal was submitted today in a letter to the Media General Board, as is valued at $14.50 per Media General share, representing a premium of 30% of Media General's closing stock price of September 25 th .
The Nexstar $4.1 billion valued offer is a bold attempt to quell Media General's recent agreement to buy Meredith Corp. ( MDP ) for roughly $2.4 billion in cash and stock assets. This deal, which still needs to be approved by both companies' shareholders, was valued at $3.1 billion.
Perry Sook, Chairman, President and CEO of Nexstar, stated, "The transaction we are proposing would be a transformational event for both Nexstar and Media General shareholders and would deliver superior, immediate and long-term value to Media General's shareholders compared with Media General's proposed acquisition of Meredith."
Media General said in a statement it would "carefully review and consider the proposal to determine the course of action that it believes is in the best interests of the company and its shareholders."
"It is illogical that Media General's board has refused to engage with us and has instead pursued an ill-conceived and value-destructive acquisition of Meredith that would once again expose Media General shareholders to the risks of the low-margin publishing business," as Mr. Sook states his beliefs.
Nexstar states its shareholders would control 74% of the combined company, with Media General's shareholders controlling the remaining 26%. The combined company is expected to generate pro-forma annual free cash flow of more than $450 million per the Nexstar press release .
Nexstar has a portfolio of more than 100 TV stations in 58 markets, covering about 18% of US television households. Media General operates or services 71 stations. A merger of the two media companies would create a unified broadcasting company owning or providing services to 162 stations in 99 markets, reaching 39% of US television households.
The third company in play, Mereith, is known for its Better Homes & Garden and Family Circle magazines, as well as its 17 local TV stations, which are the centerpiece of the Media General-Meredith proposed merger. Per the Wall Street Journal, "Meredith Media General, as it would be known, would encompass 88 stations reaching 30% of U.S. households, or 34 million homes."
There has been a trend of consolidation in the US broadcasting industry, as many local television stations attempt to maintain or obtain leverage with the big name cable conglomerates and satellite providers, many of whom are performing similar mergers.
The broadcasting landscape is going to look rather different in the upcoming years. The benefits of consolidation in any industry are up for debate. Either way, there are going to be fewer and fewer independently operated broadcasting companies.