Starboard urges Media General to sell itself to Nexstar

A third player has entered the equation, making an unsolicited bid for Media General and arguing that its acquisition of Meredith is “ill-conceived”. Traders on the street believe the stock could head to levels of $14.50 in the near term which is a positive.

The new deal would terminate the agreement between Media General and Meredith.

Media General, in its own statement, said it will review and consider the proposal, but asked shareholders to take no action regarding the offer.

Media General recently traded at $13.64, Nexstar was unchanged and Meredith was up 0.2%. Nexstar pointed out that the merger of Media General and Meredith would result in a smaller operator of 82 stations in 54 markets.

Starboard, which beneficially owns about 4.5% of the outstanding shares of Media General, expressed serious concern over Media General’s apparent refusal to negotiate a superior transaction with Nexstar Broadcasting Group (NXST) prior to finalizing the questionable Meredith transaction.

Charging that Media General deal to acquire Meredith is “value-destructive” and “ill-conceived”, Nexstar CEO Perry Sook says he is prepared to pay $14.50 for Media General, a 30% premium over Friday’s close.

Nexstar, meanwhile, owns and operates 107 television stations in 58 markets, accounting for about 18% of American households. Shareholders with any misgivings at all about the future of TV, Media General’s management or the Meredith deal might find that appealing.

TheStreet Ratings team rates MEDIA GENERAL INC as a Sell with a ratings score of E+. On average, analysts anticipate that Nexstar Broadcasting Group will post $2.55 earnings per share for the current year.

Starboard also said it was concerned that buying Meredith, the publisher of Family Circle and Better Homes and Gardens, would expose Media General to the low-growth and low-margin publishing business that it quit in 2012.

On a conference call Monday, Sook said he began talking with Media General shareholders and management in March, and made a private proposal in August that was “summarily rejected as undervaluing the company”.

“Your shareholders should be aware of the compelling value represented by our proposal, which would be lost if the Meredith-Media General transaction is consummated”, he wrote.