Caught in the middle of two major deals, a downtown media company has spurned the advances of a larger rival but says it is open to a longer courtship, while also maintaining its proposal to another firm.
Media General announced Monday it is entering into negotiations with Nexstar Broadcasting Group regarding the Texas-based company’s offer in late September to acquire its Richmond competitor in a cash-and-stock deal valued at about $4.1 billion.
The announcement added that Media General’s board of directors has unanimously rejected that proposal as constructed, contending it undervalues Media General and its prospects. But the announcement went on to say that the company intends to engage in private negotiations with Nexstar, adding that there are “no guarantees” that those discussions would result in a transaction.
Nexstar’s offer came in response to Media General’s announcement Sept. 8 that it would acquire the smaller Meredith Corp., an Iowa-based media company, in a cash-and-stock deal valued at $2.4 billion. According to Nexstar, that announcement came two weeks after it had made an initial offer to acquire Media General – which it says was “summarily rejected.”
Nexstar has maintained that its offer is superior to the Meredith deal, which is still open and which Media General’s board continues to recommend to shareholders. In mid-October, Media General reached an agreement with Meredith that allowed for an exchange of private information between Media General and Nexstar in light of the counteroffer.
In a statement, Nexstar CEO Perry Sook said his company was surprised its latest offer was rejected but is eager to move forward with discussions about the proposal.
“We are surprised that Media General’s Board considers the value of our proposal to be inadequate today, however, we are willing to engage with them to hear their perspectives,” Sook said.
Nexstar has said the acquisition would create the second-largest company – behind Sinclair Broadcast Group – of major television network affiliates and would own, operate, program or provide sales and other services to 162 TV stations in 99 markets – nearly double the number and reach of the would-be Media General Meredith.
By comparison, Media General has said its marriage with Meredith would create the third-largest owner of major network affiliates, combining Media General’s 71 stations – including WRIC in Richmond – with Meredith’s 17 for a total of 88 stations in 54 markets. The deal would also include Meredith’s National Media Group, which owns such magazine and online brands as Better Homes and Gardens, Allrecipes, Parents, and Shape.
In a response to Monday’s announcement, Meredith issued a statement that maintained its deal with Media General is in the best interest of shareholders.
“Meredith understands Media General Board’s fiduciary responsibility to respond to the Nexstar proposal consistent with our binding merger agreement announced on September 8, 2015,” the statement says. “However, Meredith still remains confident that the combination of Meredith and Media General will generate superior shareholder value – over both the near- and long-term – as compared to a potential Nexstar transaction.”
The statement goes on to say that the Media General agreement remains in place with committed financing, and it adds that Meredith is making progress on achieving necessary regulatory approvals. The company also says that, under the terms of the agreement, Meredith will have an opportunity to review any agreement reached with Nexstar and propose an alternative offer.
Monday’s announcement comes one week after a Media General shareholder, Starboard Value Inc., sent company leadership a letter that questioned the time it was taking to enter into negotiations with Nexstar. The letter also pegged Nextar’s initial proposal, the value of which neither company has formally disclosed, at $17 per share – $2.50 per share higher than the current proposal.
Media General has hired RBC Capital Markets and Goldman, Sachs & Co. as financial advisers and Fried, Frank, Harris, Shriver & Jacobson and Weil, Gotshal & Manges as legal counsel on the negotiations. Nexstar is working with BofA Merrill Lynch as financial adviser and Kirkland & Ellis as legal counsel.
Media General stock closed Monday at $15.38. Nexstar stock jumped from $57 to a day high of $59.11 before closing at $58.63. Meredith stock rose from a day low of $44.91 to close at $45.87.