Nexstar Broadcasting Group (Nasdaq: NXST) has begun negotiations with Media General (NYSE: MEG), the Virginia-based company that denied a previous unsolicited proposal from Nexstar that aimed to thwart its acquisition of Meredith Corp.
While Media General has agreed to enter into negotiations, the company announced Monday it has informed Nexstar that its board unanimously rejected the proposal as it stands because it “significantly undervalues Media General and its prospects,” a statement from the company read.
Nexstar’s proposal is valued at $15.70 per Media General share, based on its closing share price on Nov. 13.
“The Proposal substantially discounts Media General’s standalone growth prospects, ignores the significant asset value embedded in Media General’s excess spectrum that can be monetized via the upcoming broadcast auctions, and does not reflect an equitable share of the synergies outlined in the proposal made by Nextstar,” the statement continues. “Media General and its advisors intend to engage in private negotiations with Nexstar and note that there are no guarantees that these negotiations will result in a transaction with Nexstar. “
In response, Nexstar’s CEO Perry Sook released the following statement:
“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. We believe our proposal will deliver superior, immediate and long-term value to Media General shareholders compared with any alternatives available to the company.”
Irving-based Nexstar initially submitted a proposal on Sept. 28 to acquire Media General in a deal valued at $4.1 billion. The proposal offered Media General $10.50 per share in cash and a fixed ratio of 0.0898 Nexstar shares per Media General share. At the time, Media General’s share price was valued at $14.50 per share.
The proposal came after Media General rejected a private proposal from Nexstar two months earlier. In that proposal, Nexstar aimed to convince Media General that its planned acquisition of Meredith Corp. would be “value destructive” and cause an immediate drop in stock price.
The proposal provided a side-by-side comparison of a Media General/Nexstar combination and Media General/Meredith acquisition. In that comparison, Nexstar claims that year-one synergies would generate $75 million versus $60 million with Meredith.
On Sept. 8, Media General and Meredith entered into a definitive merger agreement, in which Media General will acquire all of Meredith's outstanding common sock in a cash-stock transaction. Media General's board continues to recommend this transaction.
“We are eager to move forward with discussions with Media General regarding our proposal, while at the same time maintaining our financial discipline,” Sook said in the statement released Monday. “It is evident since our initial announcement that Media General and Nexstar shareholders recognize the compelling strategic and financial value that a Media General-Nexstar combination presents for both companies and our respective shareholders.”
