Having received an unsolicited acquisition bid from Nexstar Monday morning after announcing a merger with Meredith on Sept. 8, Media General is in the driver’s seat.
“If you’re Media General, you suddenly say, ‘wow, I’m the prettiest girl at the prom. I can pick from two different people. That would seem to tell me I could bid them up,’” said Larry Patrick, founder and managing partner, Patrick Communications. “They are two offers from two very respectable companies. It gets down to the Media General shareholders as to where they want to be, who they want to be lined up with.”
Nexstar’s unsolicited $4.1 billion bid — which would create a company with 162 stations in 99 markets reaching 39% of the U.S., all higher numbers than the Meredith Media General merger — was not a surprise to Patrick, who said that after the Meredith deal was announced, Wall Street and publications were questioning whether there was a better fit.
The morning news was no shock to Elliot B. Evers, managing director of Media Venture Partners, either. “Given how the street has reacted to the Meredith deal, to see something like this, pure-play without publishing, it’s not surprising,” he said. “Does Media General want to be a buyer or a seller? That’s a key set of considerations.”
As reputable as Nexstar CEO Perry Sook is in negotiating retrans consent, Bill Hague, executive VP, Frank N. Magid Associates, said that a key component is how the company’s culture fits with the other’s, especially in the investment of local news and programming.
One of the biggest talking points has been Meredith’s digital and publishing assets — brands like Better Homes and Gardens, Shape and AllRecipe.com— compared to the pure-play broadcasting company Nexstar is offering.
Evers said he doesn’t understand the desire for print. “I’m not hopeless on print, but I’m pretty down on print. It’s tough to make money with magazines,” he said. “It’s hard for me to believe that Media General wants an exposure to print. My gut, my instinct is that it’s all about broadcast.
“It would be irresponsible (of Media General) not to give some serious thought to what’s on the table.”
Media General declined to comment beyond its morning response that it will review the bid.
“Each is going to say, we’re prettier and better for you and have better management,” Patrick said. “It’s going to be an interesting battle. If I were betting, I’d give a slight edge to Nexstar at the moment. I think it will be close.”
At the time, Media General probably thought its deal with Meredith was perfect, Patrick said, or perhaps Media General was under obligation not to engage when Nexstar approached last month with its private proposal.
Both Patrick and Evers called Nexstar’s deal “compelling.” It represents a 30% premium to Media General’s Sept. 25 closing stock price. Patrick said those numbers are usually in the single digits or very low double digits, not 30%.
“It tells me, Nexstar is going full guns blazing here to try to take this deal away from Meredith,” Patrick said. “If you’re a shareholder and want to be here for the long term and believe in TV, you very well might say well this is a faster better deal to get me to the top.”
The Nexstar proposal also presents Media General the opportunity to become the second biggest owner of major network affiliates, rather than the third with Meredith, and includes some “pretty persuasive” slides from Sook.
“He’s trying to get Media General shareholders to tap the brakes and slow down on Meredith and at least give him a look at it,” Patrick said. “It doesn’t cost Perry much to do this.”
The next step, Patrick said, is for Media General to have its board or independent directors get an evaluation opinion from outside lawyers and Wall Street advisors and share that with its shareholders as protection from a possible lawsuit. A respected Wall Street firm blessing the deal is “not a perfect shield” against a shareholder lawsuit, Patrick said, “but it’s 99% bulletproof that you will withstand an attack.”
While Media General has two deals to consider, Patrick said one thing is certain: “I wouldn’t think the deal on the table is the last and final deal for either of them.”
