Media General has rejected a sweetened buyout offer from Nexstar Broadcasting as too low, a move that could force the second largest independent station owner in the country to walk away from the broadcaster and clear the path for its earlier merger proposal with Meredith Corp.
Media General had agreed to purchase Meredith in September in a deal valued at $2.4 billion. A few weeks later Nexstar made an unsolicited offer to acquire Media General for $4.1 billion ($15.36 per share), a proposal that caused Media General’s board of directors to put the Meredith deal on hold while it evaluated the new transaction. Nexstar later kicked up its offer to $15.70 per share, which Media General also thought was too low.
But those negotiations apparently hit a snag and Nexstar said Wednesday that Nexstar rejected its sweetened $16.31 per share cash and stock offer. According to Nexstar, it proposed a deal consisting of $11 per share in cash (less a 46 cents per share break up fee tied to the Meredith proposal) and 0.1024 Nexstar shares for every Media General share. Nexstar said that offer represented a 46% premium to Media General’s closing price on Sept. 25.
According to Nexstar, Media General countered with an offer consisting of $11 per share in cash and an exchange ratio of 0.135 Nextar shares for every Media General share. That deal, accordnigto Nexstar, is worth about $18.61 per Media General share, or a 67% premium to its price on Sept. 25.
“Despite strong support from Media General shareholders for our past proposals, we have reached an impasse in our negotiations to acquire Media General as their Board has again rejected our very compelling offer and responded with an unrealistic counter proposal,” Nexstar chairman and CEO Perry Sook said in a statement. “The response from Media General is disappointing as our revised offer reflects our recent confirmation of our projections for first year synergies and our continued focus on structuring a transaction that would enable the combined company to generate prodigious free cash flow that would be allocated for leverage reduction, additional strategic investments and the return of capital to shareholders.”
In a statement, Media General said its board clearly communicated to Nexstar that it believed its offer undervalued the company but remains open to discussing an improved proposal.
"Our Board believes that a change in control transaction at the proposed valuation levels does not properly compensate our shareholders for the financial and strategic value Media General would bring to a combination with Nexstar," Media General said in a statement, adding that the board continues to recommend the proposed Meredith deal.
Nexstar said the Media General counter proposal is too rich, representing a cash flow multiple of about 10.6 times. In his statement, Sook called the counter offer “unreasonable,” and said Nexstar could walk away from the deal.
“As a disciplined acquirer, we will only consummate a transaction that makes sense for both companies’ shareholders,” Sook continued. “Given factors such as the current interest rate environment and the impending commencement of high levels of political advertising, time is of the essence and further delays in reaching reasonable terms for a transaction could impact the value creation we outlined at the time we announced our original proposal. We believe Media General shareholders will be disappointed with their Board’s unreasonable negotiating position given the immediate and long-term strategic and economic benefits a combination with Nexstar would provide, and that they will urge Media General to engage with us to reach a transaction on reasonable economic terms.”
BofA Merrill Lynch is acting as financial advisor and Kirkland & Ellis LLP is acting as legal counsel to Nexstar in connection with the proposed transaction.