Meredith Deal with Media General Hangs By a Thread

Media General Inc. said it has negotiated a deal to be bought by Nexstar Broadcasting Group Inc., though that takeover would be contingent on the termination of its deal to merge with Meredith Corp., which itself fired back with new terms for a merger Thursday.

Calling its deal with Media General a “Merger of Equals”, Meredith added it believes Nexstar and Media General won’t be able to enter into an agreement and file the application in time for the spectrum auction, which will result in “significantly delaying any financial benefit to Media General shareholders, and exposing the transaction to potential market and industry risks”. Media General, which wanted $18.61 per share, rejected Nexstar’s offer of $16.31, wondering publicly if it was “indeed its best and final proposal” given that it was down from the $17 in Nexstar’s original August 10 proposal. If shareholders don’t approve the Meredith deal, Media General would be permitted to terminate the agreement and enter the merger agreement with Nexstar.

Media General confirmed that it has completed the negotiation of terms for a transaction under which Nexstar Broadcasting Group, Inc. would acquire Media General.

Media General had agreed to acquire Meredith for $2.4 billion in September.

An alignment of interests offering shareholders of both companies a balanced opportunity to participate in the future success of the new Meredith Media General.

Media General summarily rejected Nexstar’s initial offer, but was essentially forced by the unhappy shareholders to negotiate with Nexstar to see if they could agree on a price.

That’s in contrast to the existing terms of the merger, under which Media General shareholders would receive one share of the new company and no cash proceeds. “If shareholders vote it down, MDP would receive a $60 MM breakup fee”, they noted.

“Specifically, the combined company would be highly attractive to programmers and advertisers alike, while the anticipated year-one synergies of $76 million and generation of over $500 million of annual free cash flow will enhance long-term shareholder returns”, he said.

Importantly, Meredith and Media General will continue along the current regulatory approval timeline, with a targeted closing date by June 30, 2016, pending successful completion of overlap station divestitures. In addition, two Media General directors would join the Nexstar Board of Directors at closing.