Media General weighs its fate in two deals

On Sept. 8, Richmond-based Media General announced plans to acquire Des Moines, Iowa-based Meredith Corp. for $3.1 billion. Just 20 days later Media General received an unsolicited $4.1 billion takeover offer from Irving, Texas-based Nexstar Broadcasting Group Inc. that would cancel the Meredith deal.

By early October, two Media General major shareholders, Oppenheimer Funds Inc. and Starboard Value LP, had said they opposed the Meredith merger. As this issue went to press, Media General was reviewing Nexstar’s offer. If Media General backs out of the Meredith deal, it will owe the Iowa company $60 million.

Media mergers among television station owners have become increasing common. “It’s just going to be more consolidation in the industry,” says Tracy Young, analyst for Evercore ISI in New York.

With the Meredith deal, Media General would add 17 television stations and a magazine business with well-known titles such as Better Homes and Gardens, Parents and Shape. “They aren’t buying it for the magazine business,” Young says. “There are more dollars on the broadcast side.”

The combined company, Meredith Media General, would become the third-largest owner of major network affiliates in the nation, initially owning 88 stations in 54 markets. The stations would reach 30 percent of U.S. television households.

“There are six markets that have overlap and will have to swap or sell a station,” Young says. “The new combined company could buy more television stations.”

Media General and Meredith were talking “about having two different headquarters” in Richmond and Des Moines, Young says. But that decision wasn’t set in stone.

In its September bid, Nexstar offered to buy Media General for $14.50 a share. The combination would create a company with 162 stations in 99 markets, reaching 39 percent of U.S. television households. Nexstar shareholders would own 74 percent of the combined company.  

Nexstar described the Meredith-Media General deal as “ill conceived” and “value destructive.” The Texas company revealed that it had been rebuffed in a previous bid for Media General in August just before it announced the Meredith deal.

“Media General probably should have picked up the phone a while ago [for Nexstar’s August offer of $17 a share],” Marci Ryvicker, a senior analyst for Wells Fargo, says in a written assessment of the two deals. “We believe the Street would have been extremely happy with that.”