Nexstar-Media General Would Be Pure-Play TV

Nexstar Broadcasting, attempting to drive a wedge between Media General and Meredith Corp., offered almost $1.9 billion to buy Media General on Monday.

Nexstar’s proposal to buy Media General is expected to achieve $75 million of cost savings in its first year after closing, according to an analysis by Bloomberg Intelligence.

Nexstar, meanwhile, owns and operates 107 television stations in 58 markets, accounting for about 18% of American households.

Nexstar founder and CEO Perry Sook called the Meredith tie-up “illogical” and “ill-conceived”, in a letter to Media General’s top executives Monday.

Media General earlier in September agreed to acquire Meredith for about $2.4 billion in cash and stock, continuing a trend of consolidation in the US broadcast industry as local TV stations look for negotiating leverage against large cable and satellite providers.

Nexstar said its shareholders would hold about 74 percent of the combined company, with Media General’s shareholders holding the rest. The Meredith Corporation, which owns seventeen local television stations, is best-known for its women’s network magazines, including Better Homes and Gardens.

Nexstar indicated in its letter that it believes it is a mistake for Media General to increase once again its exposure to the publishing business, which has been bedeviled by declining circulation and advertising revenue. Shares of Nexstar, based in Irving, Texas, rose $1.90, or 4.4 percent, to $45.41.

“As demonstrated by the 10.5% decline in Media General’s stock price in the five trading days following the announcement of the Meredith transaction, shareholders were clearly surprised and dismayed by the transaction”. It says it reviewed “with great interest” the Nexstar offer, which it believes “highly strategic”. Media General, which began as a newspaper company, sold most of its print publications to Berkshire Hathaway in 2012.

The Nexstar bid, delivered to Media General as a letter, describes the Meredith deal as “ill-conceived” and contends that a Nexstar/Media General merger would offer even bigger scale-162 stations in 99 markets versus 82 stations in 54 markets.

BofA Merrill Lynch is going about as financial consultant and Kirkland & Ellis LLP is going about as legitimate direction to Nexstar regarding the proposed exchange.