Proposal Provides 30% Premium to Media
General Shareholders
Combining Nexstar and Media General Would
Create Leading Pure-Play Broadcaster with Enhanced Scale and
Substantial Free Cash Flow
Combination Would Be Well Positioned To
Deliver Superior Immediate and Long-Term Shareholder Value Compared
to Proposed Media General/Meredith Combination
Nexstar Broadcasting Group, Inc. (Nasdaq: NXST) announced today
a proposal to acquire Media General, Inc. (NYSE: MEG) for $10.50
per share in cash and a fixed ratio of 0.0898 Nexstar shares per
Media General share. The proposal, currently valued at $14.50 per
Media General share, was submitted today in a letter to the Media
General Board. It represents a premium of 30% to Media General’s
closing stock price on September 25.
Perry Sook, Chairman, President and CEO of Nexstar, said, “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.
“Our proposal provides a significant premium to Media General’s
shareholders, including a cash component nearly equal to Media
General’s current share price. Our proposal would also enable
Nexstar and Media General shareholders to participate in the near-
and long-term upside of a pure-play broadcasting company with
expanded audience reach, a more diversified portfolio, and a
significantly stronger financial profile, including substantial
free cash flow per share, led by a proven broadcast and digital
media management team. Nexstar is already growing rapidly as a
result of our organic and M&A initiatives, but a combined
Nexstar/Media General would be even better positioned for long-term
success in a dynamic and consolidating market and certainly better
positioned to deliver shareholder value than a combined Media
General/Meredith.
“Given the compelling strategic and financial value of a
combination, 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. We believe our offer is compelling and
provides a value-building path forward for both Media General and
Nexstar shareholders. We look forward to engaging in dialog with
the financial community regarding the superior merits of our
proposed transaction.”
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.
Nexstar’s letter to the Media General Board is below.
September 28, 2015Sent VIA Email and FedEx
Mr. J. Stewart Bryan III, ChairmanMr. Vincent L. Sadusky,
President and Chief Executive OfficerMedia General, Inc.333 East
Franklin StreetRichmond, VA 23219
Dear Stewart and Vince,
We have been attempting for many months to enter into
substantive negotiations with you regarding a combination of Media
General, Inc. (“Media General”) and Nexstar Broadcasting Group,
Inc. (“Nexstar”). Our Board strongly believes that a merger of
Media General and Nexstar would be strategically and financially
compelling for both of our companies and shareholders. The combined
company’s significantly expanded audience reach and portfolio
diversification would be highly attractive to programmers and
advertisers alike, and its enhanced operating and financial scale
would position it for near- and long-term success in an environment
of ongoing industry consolidation. Pro-forma for synergies, the
combination would generate in excess of $450 million of annual free
cash flow (averaged over two year cycles), which would be allocated
for continued investment in the business and for deleveraging and
other initiatives that enhance long-term shareholder returns.
Given this compelling rationale, we were surprised that, just
two weeks after you summarily rejected our August 10th private
proposal for Nexstar to acquire Media General at a substantial
premium – without any discussion with us – you announced a
value-destructive agreement to acquire Meredith Corporation,
including the proposed issuance of 54% of Media General’s shares at
market price. We strongly believe a combination of Media General
and Nexstar is far more compelling strategically and financially
than your planned acquisition of Meredith. The ill-conceived
Meredith transaction, which caused an immediate drop in Media
General’s stock price and criticism from a number of your investors
and analysts, exposes Media General once again to the publishing
business and creates a pro-forma EBITDA mix with significant
exposure to publishing. Were you to engage with us, we believe you
could deliver significantly more value to your shareholders.
Accordingly, we are submitting this proposal for Nexstar to
acquire Media General for $10.50 per share in cash and a fixed
exchange ratio of 0.0898 Nexstar shares per Media General share,
for an aggregate current value of $14.50 per share, or a total
transaction value of $4.1 billion, including assumption of Media
General’s debt. This proposal would deliver a premium of 30% over
Media General’s closing stock price on September 25. It also
represents an enterprise value multiple of approximately 9.1x Media
General’s projected blended 2015/2016 EBITDA based upon analysts’
consensus estimates, which compares favorably with both precedent
transactions and trading multiples in the broadcast sector.
Our proposal’s cash consideration alone is nearly equal to Media
General’s current share price, which de-risks Media General
shareholders’ investment. At the same time, your shareholders would
own approximately 26% of the combined company, thereby providing
substantial ongoing participation in a well-positioned pure-play
broadcasting company led by a management team with a strong
long-term record of shareholder value-creation.
We believe our proposal is a superior transaction in all
respects to your proposed acquisition of Meredith. 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.
Combination of Media General and
Nexstar Is Far Superior to the Ill-Conceived Acquisition of
Meredith.
Based on the stated rationale and benefits associated with the
Meredith merger, you clearly believe in the logic of broadcast
consolidation and that the value of Media General’s assets can be
better realized under different management. We agree and believe
that a combination of Nexstar and Media General would create a
combined entity with enhanced scale and geographic diversity to
compete effectively in a consolidating and dynamic market while
offering shareholders the prospects for superior returns compared
to a combination of Media General and Meredith:
Category Media General/Nexstar
Combination Media General/Meredith
Combination Stations 162 82 Markets 99
54 U.S. TV Household Reach 39% 30% Affiliate
Position #2 Owner of Major Network Affiliates #3
Owner of Major Network Affiliates Business Mix Pure-play
broadcast operator Broadcast and publishing assets Market
Overlap 7 markets (only 3 in top 100) 6 markets (5 in
top 100 including 3 top-30 markets)
Broadcast-Only EBITDA (post
divestitures)1
$8422 $6153 Total Synergies $75 in year one
$60 in year one
Note: Dollars in millions. 1Broadcast-only EBITDA
would be 37% larger in a Media General/Nexstar transaction than in
a Media General/Meredith transaction. 2Includes $75 million of
synergies and assumes the divestiture of $30 million of
EBITDA. 3Represents $453 million and $187 million of EBITDA
attributable to Media General and Meredith Broadcasting,
respectively, less the divestiture of $70 million of EBITDA
attributable to Broadcasting plus assumed $45 million of
Broadcast synergies net of divestitures.
Greater Scale and Diversity, More Stations, Larger Number of
Markets, Greater U.S. Household Reach. Together, Nexstar/Media
General would be the #2 owner of major network affiliates and a
pure-play broadcast operator that owns, operates, programs or
provides sales and other services to 162 stations in 99 markets,
reaching 39% of all U.S. television households. We would be an
enhanced retransmission partner, have available potential
additional spectrum for upcoming auctions and deliver greater
opportunities for disciplined expansion in digital media and other
complementary operating areas. In addition, we would be able to
deliver more quality local programming and content for our
collective broadcast and digital operations.
The Media General/Meredith Transaction Requires Significantly
Greater Divestitures. Overlapping markets in the Meredith
transaction include top-ranked DMAs including Portland, OR (#23),
Nashville, TN (#29) and Hartford-New Haven, CT (#30), which are
expected to be divested as a regulatory condition to complete that
combination. We believe a Media General/Nexstar combination is far
more complementary; while it would require a similar number of
divested stations, they would be in significantly smaller markets
and result in substantially less revenue and EBITDA leakage. Based
on our estimates, the combined Media General/Meredith would be
required to divest approximately 37% of the acquired Broadcast
EBITDA, compared to only 7% in the case of a Nexstar/Media General
combination.
Over Half of the Net Acquired Meredith EBITDA Would Come from
Publishing. Following the anticipated required divestitures,
which we estimate would reduce broadcast-related EBITDA by $70
million, approximately 54% of the acquired net EBITDA in the
Meredith transaction would be derived from publishing, a business
you recently divested. Based on a blended EBITDA purchase multiple
of 9.5x for Meredith as a whole, and an assumed publishing multiple
of 6.5x, we estimate that Media General is acquiring Meredith’s net
broadcast EBITDA at approximately 13x, well above precedent
transactions. In addition, there would be tax leakage associated
with the required sales of overlapping stations, which we have not
factored into our analysis. Given these facts, we question the cash
flow accretion you have projected. Taking into consideration these
factors, a pure-play broadcast Media General/Nexstar combination
would be 37% larger than a Media General/Meredith combination from
a broadcast-only EBITDA standpoint.
Media General’s Stock Price Movement and Comments from the
Financial Community Suggest Discontent with the Media
General/Meredith Combination. In the week following your
announcement on September 8, Media General’s stock traded down
significantly and only began recovering following a Wells Fargo
research report on September 14 that indicated investors are
unhappy with the proposed transaction and that Nexstar could make a
counter bid:
“Investors...seem both confused and
disappointed. According to our conversations, they feel that MEG
should not be re-entering the publishing space, that the price for
MDP is too high, and that the timing is just “strange.” It sounds
to us like top holders of MEG (and some of MDP) are planning to
vote this deal down in the hope that another co. comes in to bid
(most peg NXST).”
We Expect Shareholders to Prefer Our Transaction. We have
heard from many of your shareholders that they are displeased with
the Meredith transaction, and we are confident that our proposed
transaction would be enthusiastically welcomed by your
shareholders. It provides your shareholders with a substantial
premium, certain and immediate cash value, and continued
participation in the ongoing strategic and financial benefits of a
combination with Nexstar, including anticipated year one synergies
of $75 million. Our proposal is unquestionably a more favorable
alternative for your shareholders than the proposed Media
General-Meredith transaction.
The Nexstar Management Team Is Better Positioned to Lead a
Broadcasting Company. Nexstar’s management team has achieved
excellent results on behalf of our shareholders in the 12 years
since Nexstar’s IPO and clearly highlight our management’s
unwavering commitment to the creation of shareholder value. We have
a sustained record of profitable digital media initiatives,
unrivalled broadcast industry experience, a strong record of
integrating acquired assets and extracting the value and synergies
highlighted at the time transactions were announced, an
industry-leading position with respect to MVPD and network
relationships, and a notable record of creating award-winning
programming and content in the markets where we operate.
Importantly, our team is committed to the Media General combination
and will “own” the results and synergies. This is in sharp contrast
to the Meredith transaction where the Media General management team
is “handing over the keys” to the Meredith management team.
Given all of the above, we believe our proposal constitutes or
would reasonably be expected to lead to a “Montage Superior Offer”,
as defined in your existing merger agreement with Meredith. As you
know, by receiving our “Montage Superior Offer”, Section 6.11(b) of
that merger agreement expressly permits the Media General Board to
provide us with confidential information and negotiate with us
regarding our proposal. To meet its fiduciary duties, we believe
your Board is required to do so. A continued refusal to engage with
us is contrary to your Board’s obligation to act in the best
interest of your shareholders.
We intend to fund the cash consideration (and any required debt
refinancing) by accessing the public debt markets. We have a proven
record of raising capital to fund strategic growth initiatives and
have received a Highly Confident Letter from BofA Merrill Lynch,
confirming our ability to secure the required financing.
Accordingly, a definitive agreement between us would not contain
any financing condition, and we are prepared to provide you with
full financing commitment papers.
We are prepared to enter into a merger agreement with you that
provides your shareholders with a degree of closing certainty
consistent with that provided in your existing merger agreement
with Meredith. We believe the regulatory requirements presented by
a combination of our companies would be straightforward, and we
would intend to address them through commitments consistent with
those in your existing merger agreement. This letter is a
non-binding, preliminary proposal, which is subject to the
execution and delivery of mutually acceptable definitive
agreements, termination of your transaction with Meredith and the
satisfaction of customary closing conditions.
We are very excited about the prospect of a combination between
our two great companies and the completion of a successful
transaction that will benefit the shareholders of both companies.
Since 2011, including pending transactions, Nexstar has acquired 64
television stations and four digital businesses -- all in accretive
transactions. Nexstar’s record of effectively integrating and
extracting synergies from acquired stations and assets has
consistently met or exceeded our goals and expectations. We believe
that our long-term acquisition strategies and operating discipline,
combined with the prudent management of our capital structure, is a
proven formula for sustained long-term growth and shareholder value
appreciation. From 2006 through 2014, we have grown Nexstar’s free
cash flow at a compound annual growth rate of approximately 25%.
Accordingly, we are highly confident that a Nexstar-Media General
combination would deliver significant value to our respective
shareholders and provide a clear and transparent path toward
creating a stronger company, well-positioned to achieve
sustainable, long-term growth.
We have retained BofA Merrill Lynch as our financial advisor and
Kirkland & Ellis as our legal advisor, and we are prepared to
engage with you and your advisors immediately. Our Board has
reviewed our proposal and unanimously approves of this transaction.
With access to due diligence, we anticipate being able to prepare
and execute a definitive merger agreement within 20 days. We urge
you to listen to your shareholders and look forward to hearing from
you promptly.
Sincerely,
Perry A. SookChairman, President and Chief Executive
OfficerNexstar Broadcasting Group, Inc.
Conference Call, Webcast, Investor PresentationNexstar
will host a conference call at 8:30 a.m. ET today to review the
transaction and host a question and answer session. To access the
conference call, interested parties may dial 866/547-1509 (domestic
callers) or 920/663-6208 (international callers). The Conference ID
Number is 49949293. Participants can also listen to a live webcast
of the call through the “Webcast/Presentations” section of
Nexstar’s website at www.nexstar.tv. During the conference call and
webcast, management will review a presentation summarizing the
proposed transaction which can be accessed at www.nexstar.tv. A
webcast replay will be available for 90 days following the live
event at www.nexstar.tv. Please call five minutes in advance to
ensure that you are connected. Questions and answers will be taken
only from participants on the conference call. For the webcast,
please allow 15 minutes to register, download and install any
necessary software.
About Nexstar Broadcasting Group, Inc.Nexstar
Broadcasting Group is a leading diversified media company that
leverages localism to bring new services and value to consumers and
advertisers through its traditional media, digital and mobile media
platforms. Nexstar owns, operates, programs or provides sales and
other services to 107 television stations and related digital
multicast signals reaching 58 markets or approximately 18.0% of all
U.S. television households. Nexstar’s portfolio includes affiliates
of NBC, CBS, ABC, FOX, MyNetworkTV, The CW, Telemundo, Bounce TV,
Me-TV, LATV, RTV, Estrella, This TV, Weather Nation Utah, Movies!
and News/Weather. Nexstar’s community portal websites offer
additional hyper-local content and verticals for consumers and
advertisers, allowing audiences to choose where, when and how they
access content while creating new revenue opportunities.
Pro-forma for the completion of all announced transactions
Nexstar will own, operate, program or provides sales and other
services to 114 television stations and related digital multicast
signals reaching 59 markets or approximately 18.0% of all U.S.
television households.
Additional InformationThis communication does not
constitute an offer to buy or solicitation of an offer to sell any
securities. This communication relates to a proposal which Nexstar
Broadcasting Group, Inc. (“Nexstar”) has made for a business
combination transaction with Media General, Inc. (“Media General”).
In furtherance of this proposal and subject to future developments,
Nexstar (and, if a negotiated transaction is agreed, Media General)
may file one or more registration statements, prospectuses, proxy
statements or other documents with the U.S. Securities and Exchange
Commission (“SEC”). This communication is not a substitute for any
registration statement, prospectus, proxy statement or other
document Nexstar and/or Media General may file with the SEC in
connection with the proposed transaction. INVESTORS AND SECURITY
HOLDERS OF NEXSTAR AND MEDIA GENERAL ARE URGED TO READ ANY
REGISTRATION STATEMENT, PROSPECTUS, PROXY STATEMENT AND OTHER
DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY IF AND
WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION. Any definitive proxy
statement (if and when available) will be mailed to stockholders of
Media General. Investors and security holders will be able to
obtain free copies of these documents (if and when available) and
other documents filed with the SEC by Nexstar or Media General
through the web site maintained by the SEC at
http://www.sec.gov.
Certain Information Regarding ParticipantsNexstar and
certain of its directors and executive officers may be deemed to be
participants in any solicitation with respect to the proposed
transaction under the rules of the SEC. Security holders may obtain
information regarding the names and interests of Nexstar’s
directors and executive officers in Nexstar’s Annual Report on Form
10-K for the year ended December 31, 2014, which was filed
with the SEC on March 2, 2015, and Nexstar’s proxy statement
for the 2015 Annual Meeting of Stockholders, which was filed with
the SEC on April 24, 2015. These documents can be obtained
free of charge from the sources indicated above. Additional
information regarding the interests of participants in any proxy
solicitation and a description of their direct and indirect
interests, by security holdings or otherwise, will also be included
in any proxy statement and other relevant materials to be filed
with the SEC if and when they become available.
Forward-Looking StatementsThis communication includes
forward-looking statements. We have based these forward-looking
statements on our current expectations and projections about future
events. Forward-looking statements include information preceded by,
followed by, or that includes the words "guidance," "believes,"
"expects," "anticipates," "could," or similar expressions. For
these statements, Nexstar claims the protection of the safe harbor
for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. The forward-looking statements
contained in this communication, concerning, among other things,
the ultimate outcome and benefits of any possible transaction
between Nexstar and Media General and timing thereof, and future
financial performance, including changes in net revenue, cash flow
and operating expenses, involve risks and uncertainties, and are
subject to change based on various important factors, including the
possibilities that Nexstar will not pursue a transaction with Media
General and that Media General will reject a transaction with
Nexstar (or otherwise that no transaction will be consummated), the
impact of changes in national and regional economies, our ability
to service and refinance our outstanding debt, successful
integration of Media General (including achievement of synergies
and cost reductions), pricing fluctuations in local and national
advertising, future regulatory actions and conditions in the
television stations' operating areas, competition from others in
the broadcast television markets served by Nexstar, volatility in
programming costs, the effects of governmental regulation of
broadcasting, industry consolidation, technological developments
and major world news events. Unless required by law, we undertake
no obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this communication might not
occur. You should not place undue reliance on these forward-looking
statements, which speak only as of the date of this release. For
more details on factors that could affect these expectations,
please see our filings with the Securities and Exchange
Commission.
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version on businesswire.com: http://www.businesswire.com/news/home/20150928005599/en/
Investors:Nexstar Broadcasting Group, Inc.Thomas E.
Carter, 972-373-8800Chief Financial OfficerorJCIRJoseph
Jaffoni/Jennifer Neuman212-835-8500nxst@jcir.comorInnisfree M&A
IncorporatedLarry Miller/Jonathan Salzberger/Scott
Winter212-750-5833orMedia:Sard Verbinnen & CoGeorge
Sard/Jim Barron/Stephanie Pillersdorf/Jared Levy212-687-8080
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